There are a variety of ways to manage retirement funds. Some purchase property while others place fixed deposits, buy blue chip stocks for dividends, and yet there are also some who simply prefer to hold cash and stay away from any investments. Seniors will have a different set of investment objectives and risk tolerance, and hence there are alternative retirement and investment products such as the HKMC Annuity Plan, Reverse Mortgage Programme and Silver Bonds, that have been tailored for them.
The following table lists out the primary objectives and risks of different retirement products and investments.
|HKMC Annuity Plan
- Allow the elderly to convert their retirement savings into monthly annuity payouts. Each annuitant will receive a guaranteed and fixed amount of monthly payouts for the whole life.
- As the amount of monthly annuity payouts is fixed, inflation will erode the purchasing power.
|Reverse mortgage programme
- Under this scheme, the elderly can use their home as security to borrow from a bank. They can opt to receive monthly payouts over a fixed term or throughout their entire life, or take out the loan in one lump-sum. No repayment will be required, and they can live in the home throughout the life.
- Only applicable to home owners. The programme involves different fees, mortgage insurance premium and interest. Early cancellation of the loan would mean repaying all the debts.
- An investment product to mitigate inflation risks. The bond has a tenor of three years, and pays interest every six months at a rate linked to the local inflation, subject to a minimum rate of 2%.
- The tenor of the bond is short and cannot provide a long term and steady income for retirement that could last for 20 years or longer. It is only available at initial public offering, and the allotted amount could be very limited.
|HKD fixed deposit
- There is a guaranteed return and the capital is preserved. Fixed deposits of no more than $500,000 with a tenor under five years are protected by the "Deposit Protection Scheme".
- The interests of fixed deposits are subject to changes in interest rates and may not keep up with inflation. The deposit cannot be withdrawn any time during the deposit period.
|Blue chip stocks
- For gaining higher returns from fluctuations in stock prices or payment of dividends. High level of liquidity, easy to buy and sell.
- Not capital-preserved. Investors are subject to the volatility risks of the share prices and it is possible to suffer substantial losses. Dividends are not guaranteed.
Every financial product and investment has their own features, just like every person has their individual money management needs. Select retirement products and investments that are best suited to your needs, based on your own financial situation and risk appetite. Carefully consider your own needs, be it capital preservation, mitigating inflation risks or asset appreciation to achieve your investment goals.
24 July 2018