THAI INVESTORS place a high priority on saving for retirement but fear their savings will fall short of future costs, a survey finds.
The Manulife Investor Sentiment Index, conducted for the first time in Thailand in late 2016, found that while many investors take retirement planning seriously, they worry about the high toll of likely family and health costs.
Some 18 per cent of the respondent rank retirement as a top financial priority and 30 per cent of them would prioritise boosting their retirement fund if given a lump sum of three years’ salary. While 51 per cent believe they are on track or ahead of schedule when it comes to their retirement plans, 79 per cent are optimistic that they can maintain or improve their current lifestyle later on in life.
Investors are concerned, however, that their retirement savings may fall short of future requirements. Almost half of them (49 per cent) feel they are behind schedule with their financial goals and within this group, 12 per cent believe their shortfall is irrevocable. Forty per cent think they will run out of money in retirement, while 52 per cent say they will still need to pay down a debt or a mortgage, a significantly higher reading than in many other surveyed markets in Asia.
Future health and family costs are expected to outweigh retirement savings for many.
Health and family costs are expected to present a particular burden. Some 69 per cent of respondents believe their health will deteriorate as they get older and nearly half (46 per cent) believe it will worsen to the point where they can no longer work.
This is particularly significant as 46 per cent of the respondents receive additional income from a personal business, which they may no longer be able to rely on in retirement. Most investors (63 per cent) expect they will need to financially support their parents in retirement, while 27 per cent expect that they will need to support their children without receiving any in return.
Michael Parker, president & chief executive of Manulife Insurance Thailand, said: “Thai investors each have a unique sense of what retirement means for them, whether pursuing personal interests or continuing to work part-time or in a family business.
“However, they accept that these plans depend upon their future health and that with improvements in healthcare come longer lifespans and higher medical bills. This means that the cost of a comfortable retirement is growing faster than inflation. Acknowledging this and adjusting financial plans is an important step toward being secure later in life.”
The survey also revealed that investors would benefit from more education about how to boost their retirement funds. When asked how they would reverse a financial shortfall later on in life, most of the respondents who expect to have to scale back on their lifestyle in retirement (64 per cent) indicate they would increase their savings, while 24 per cent would opt to invest more in stocks and bonds which offer more competitive returns.
Some 13 per cent of these investors have no idea what they would do, indicating a lack of awareness of investment options available.
Investors may also benefit from more effective planning to maximise their returns. Those who save put nearly a third (32 per cent of their savings into unplanned deposits or investments with no specific purpose, indicating that with more structure and incremental targets, they might have a better chance of meeting their long-term financial goals.
Manulife said the survey highlighted that investors’ aversion to risk may undermine their future financial security. Sixty per cent prefer their portfolio to be in low-risk investments, which may not be the right approach for younger investors who have time to ride out market volatility.
On average, 35 per cent of investors’ assets are held in cash or deposits but the majority (63 per cent) still believe they are making enough effort to diversify their portfolio.
Michael Reed, chief executive of Manulife Asset Management Thailand, said: “In the current low-interest rate environment, relying on cash deposits is unlikely to yield attractive returns and may not give investors the return they deserve.
“Everyone should create an investment portfolio that reflects their appetite for risk and understanding how the stock market works is a crucial part of this.
“For those investors who are unsure where best to put their money, a trusted financial adviser can be a real help. Planning for retirement is a journey, not a race, and no one should feel they have to do it alone.”