THE CHANGING FACE OF LATER LIFE

That was your parents' retirement. Today, your vision of retirement is probably somewhat different from your parents' generation. The new generation's retirement planning is more than just numbers. It is also about achieving goals and aspirations. Your retirement probably won't be the cookie cutter retirement of your parents' generation and the choices you make today will impact your later life.

This is one of the key insights from "The Future of Retirement: Choices for Later Life", the 11th in a series of world-leading independent research studies into global retirement trends commissioned by HSBC Group based on a nationally representative survey of 1,000 people of working age (25 and over) and in retirement in Malaysia. So how do the goals, aspirations and expectations of the new retirement generation reflect your own vision of retirement? These are the key insights...

While only 24% of retirees semi-retired before fully retiring, over three in five (64%) working age people are planning to semi-retire before they stop work completely. Less than a third (31%) expect to fully retire straight from their current job and working hours, and 5% expect that they will never be able to fully retire.

Different paths to semi-retirement

Different people have different expectations of what working in semi-retirement will mean for them. Over half (55%) of those working age people planning to semi-retire want to stay in the same job, but work fewer hours, while just over a third (35%) are planning a change in career as well as reduced hours. For one in ten (10%), the plan is to semi-retire by changing jobs but working the same hours.

Choice vs. necessity

For people who chose the path of semi-retirement, it is a positive choice. More than three in ten (31%) retirees say they chose semi-retirement to help them keep physically and mentally active before stopping full-time work, while about a quarter (24%) enjoyed the social aspects of being in a work environment.

For others, it was simply the enjoyment of work itself that made them choose to semi-retire. Almost a quarter (24%) say they semi-retired because they liked working and a further one in five (20%) liked the routine that working brings.

However, for some, semi-retirement was more of a necessity. Nearly a third (29%) wanted to maintain a comfortable lifestyle, and more than one in five (22%) semi-retirees have/had family members to support past normal retirement age.

Ultimately, with the freedom of time, working age people aspire to spend more time doing what they want, with whom they want.

Three in five (60%) working age people want to spend more time with friends and family when they retire and over half (53%) want to go on frequent holidays. Charity and voluntary work (42%), starting a business (40%), exercise and playing more sports (39%) and learning a new skill or hobby (37%) are also popular retirement aspirations.

There are some distinct gender differences, with women having more wide-reaching retirement aspirations than men. Almost three in five (57%) working age women hope to take frequent holidays in their retirement compared to less than half (49%) of men. More working age women (43%) want to learn a new skill or hobby as compared to working age men (32%). They are also more likely to want to learn a foreign language as compared to men (19% compared to 14%) and live abroad in retirement (14% for woman as compared to 8% for men).

Younger working age people are more likely to have retirement aspirations centering on new experiences. Almost half (47%) of working age people aged 25-44 want to start a new business in their retirement, compared to a less than a third (31%) of those aged 45+. Over two in five (42%) would like to learn a new skill or hobby compared to less than a third (32%) of those aged 45+. A greater proportion (16%) of those aged 25-44 also aspire to pursue further education in their retirement compared to just 8% of those aged 45+.

Dreams vs. reality

Achieving retirement aspirations may be more difficult than expected for some. Almost nine in ten (87%) retirees say they have not yet been able to realise at least one of their hopes or dreams for retirement. The most common unachieved aspirations include living abroad (21%), writing a book (21%) or starting a new business (17%). Retirement aspirations requiring time, rather than money, are more likely to have been achieved. Almost three-quarters (74%) of retirees say they have been able to spend more time with family and friends in their retirement. Nearly half (46%) have undertaken home improvements or gardening, and almost two in five (39%) have become involved in charity and voluntary work.

While that view continues to hold true today, attitudes towards spending or setting money aside for the next generation are shifting.

Two thirds (67%) of working age people take a balanced view, believing that it is better to spend some of their money and save some to pass on to their children. However, almost a fifth (19%) think it is better to spend all their money and let their children create their own wealth, while 15% feel that it is better to save as much money as possible to pass on to the next generation.

The next generation still comes first

Despite an overall preference for spending, over four in five (83%) working age people expect to leave an inheritance to their children, while more than half (53%) expect to receive an inheritance in the future. In reality, however, less than two in five (37%) have actually received an inheritance.

Older working age people feel more confident about leaving an inheritance to their children, with over half (52%) of those aged 45+ definitely expecting to do so, whereas just over two in five (43%) working people aged 25-44 are similarly confident. However, a slightly higher proportion of the younger generation expect to receive an inheritance - 56% of 25-44 year olds expect to receive one, compared to 51% of working age people aged 45+.

Among working age people expecting to receive an inheritance in the future, three-quarters (75%) say it will help to fund their retirement, with 36% expecting it to completely or largely fund it.

According to Andrew Ireland, Head of Premier Banking, HSBC Bank USA, living inheritance adds to the already complex financial pressures faced by retirees. "A desire to support loved ones during your lifetime is of course understandable, but for many people this comes at a cost both to their retirement dreams and to their ability to leave a legacy."¹

Ireland said people should not be putting their financial futures at risk by relying on an inheritance from retired loved ones, as inheritance may not always be there for them.¹

Often family continues to be a part of the retirement puzzle. More than nine in ten (92%) working age people provide regular financial support to someone else, with over half (51%) financially supporting a parent or parents, over two in five (42%) provide for a spouse or partner and almost three in ten (29%) support children under 16. Meanwhile over a quarter (27%) are supporting grown-up children and 8% provide for grandchildren.

Despite no longer being in paid employment, many retirees (86%) continue to provide regular financial support to others. Two in five (40%) support a spouse or partner and 39% support grown-up children. Around one in five also support children under 16 (21%), grandchildren (21%) and parents (18%).

As such, HSBC Head of Retail Banking and Wealth Management, Lim Eng Seong mentioned that in order to ensure a comfortable life in retirement, retirees should consider wider financial commitments including continued financial support for their loved ones.²

Financial concerns in retirement

The prospect of on-going financial responsibilities or being financially reliant weighs on people's minds. Almost three in four (74%) working age people are worried about the ability to support their family or friends financially in retirement, and more than half (51%) have concerns about being financially dependent on family or friends in later life.

A higher proportion of working age women (21%) are very concerned that they will be reliant on family or friends for financial support than working age men (at 17%).

Retirees also share the same fears. More than three in five (63%) retirees are concerned about being able to support their family or friends financially, and over half (54%) are worried about being reliant on them for financial support.

Healthcare costs are also a source of worry. For many working age people, the cost of healthcare (88%) and becoming ill and unable to generate income (82%) are significant concerns for later life. A similar proportion (83%) of retirees are concerned about the cost of healthcare and also being unable to generate income as a result of illness (77%).

The amount of retirement income you planned for while you are still working may no longer be sufficient for your needs in retirement. A retiree may need to generate additional income to cope with unexpected expenses in retirement.³

"Retirees today may even need to generate additional income to cope with the rising costs of their own requirements such as healthcare or to ensure they can still refill the inheritance pots they intend to leave with their children," said Lim.²

As such, regular financial reviews are integral to wealth planning at post-retirement.³

Almost two in five (39%) plan to move once they have stopped working. The desire to move is stronger amongst the younger generation (aged 25-44) with almost half (45%) planning to do so, compared to 32% of those aged 45+.

Among working age people who plan to move when they retire, more than three in five (63%) plan to move from their town or city to a rural area. The buzz of city life remains attractive to others, with almost one in five (18%) planning to move from their town or city to another one.

Why move?

Working age people want to move in retirement for a variety of reasons both personal and practical. Quality of life is a key consideration with more than three in five (65%) working age people seeking a more relaxed lifestyle in retirement. Over two in five (41%) want to benefit from a cheaper cost of living, while a similar proportion want to be closer to family (39%) or enjoy better weather (38%).

Meanwhile three in ten (30%) want to move in order to broaden their horizons and cultural experiences. Younger working age people are more likely to be motivated by this reason: over a third (34%) of 25-44 year olds want to move because of this compared to less than a quarter (23%) of those aged 45+.

Global Retirees

While over one in ten (12%) working age people plan to relocate within the same country, a further 27% plan to move abroad when they retire. Of these, over a third (37%) plan to move to Australia in their retirement, while New Zealand (24%), Singapore (17%) and Switzerland (17%) are also popular destinations.

Younger working age people (aged 25-44) are more likely to set their sights on emigrating when they retire. Around one in seven (15%) have this plan, compared to 8% of those aged 45+.

HSBC Regional Head of Retail Banking and Wealth Management Asia-Pacific, Kevin Martin mentioned that with continued financial planning and active FX management people with such aspirations can avoid surprises and enjoy the retirement of their dreams.³