The current inflation in Hong Kong is 5.7% and the purchasing power of your money is going down. Your money in a bank is been eaten up gradually by inflation.
Ask Pak Financial Advice what is your biggest worry right now about not having enough money when you retire?
“I wish I can retire early and go around the world. What should I do?”
A: The questions should be when would you like to retire and how much do you need to realize and live your dream in retirement.
According to survey on retiree conducted by Fidelity Investment Group, more than half of respondents would like to start earlier and do more for their retirement planning if they can live their life again. Compounded interest will have a hugh effect on your wealth over a long period of time. Also, inflation will be eating into your quality of life.
Again, start to plan for retirement with professionals and place your plan in place as soon as possible.
“Are there any differences in my financial plan for retirement at various ages?”
A: In the whole financial planning for retirement, there are different focus at different life stages. It is due to the differences in resources, consumption pattern, lifestyle, responsibilities and stage of career.
In general speaking, 20’s to 30’s is the stage of wealth accumulation. The consumption and tax planning will help to manage the consumption pattern and cashflow. The habit of saving is to be developed, e.g. using saving plans and etc.
30’s to 40’s is the stage of wealth creation. Investment is the way to grow and expand limited financial resources from saving. Typically, it includes property investment, stock, derivatives, gold, funds, business and many other investment tools.
After 40’s, the retirement plan should be on wealth preservation and distribution. Upon success of wealth creation, at this stage, the risk tolerance level will be declining with ages and may be health as well. The key now is to protect the wealth from risks while expanding to catch up with inflation. We need to look at our wealth portfolio and review assets allocation to reduce risks as we age. It is also the time starting to consider how to pass on the wealth after life. Of course, it is the golden time to think about how to live and enjoy your dream in retirement and in peace of mind with all financial and estate plans set for the time and in future.
At any life stages, there is one pivotal point to be reviewed consistently – risk protection against unexpected events in life. The four main risks are life, accidents, health and medical. These risks if unfortunately happen, even worse if at the wrong time, our whole financial plans will be upside down and could be tragic to our families if not properly managed.
“I have been managing my own saving money for some time. Instead of growing my money, my finance is getting worse. What goes wrong?”
A: You probably need to consult a professional financial planner to find out the reasons. In the current high inflation age, you are definitely making a loss of value by putting your money in the bank for interest. The volatility of the market makes it difficult to make a profit and keep it if you are not an experienced investor . You need to find out what investment suits your skill level, risk tolerance level, investment objectives, age, income level, financial position, investment time horizon, your time involvement and etc.
In general, there are some wealth management and investment common mistakes that you need to watch out:
-Flock behavior – follow the market sentiment without understand the fundamentals
-Buy high and sell low – lack of strategies, judgement, market knowledge and experience.
-Put all eggs in one basket – unless you are like Warren Buffet who studies and understands the value of a company and the market before investing. It is risky for common people.
-No saving habit – you have to balance your cashflow with regular surplus so that you always have money to save and invest.
-Not using insurance products as part of wealth management – besides hedge against the unexpected, properly planned insurance policies can be investment tools for both wealth protection and wealth expansion.
-Too busy for career / business development and no time to manage your money – get professionals to help you. Let money works hard for you too.
