Why are APAC retirees struggling with unexpected costs?

Over a fifth of respondents had not anticipated their retirement expenses.

Saving for retirement was the top financial goal across all age groups, yet 59% of respondents said they would delay retirement planning until five years or less before retirement. Alarmingly, 14% admitted they have no plans to prepare financially for retirement at all, Sun Life revealed.

The lack of early planning is causing significant financial strain for retirees, with 26% reporting that they had not anticipated their retirement expenses, and 20% were caught off guard by higher-than-expected costs, particularly related to living and healthcare expenses.

Sun Life Asia’s Retirement Reimagined: Facing the Future with Confidence highlighted key challenges in retirement planning across the Asia-Pacific region. The survey, which included over 3,500 respondents from China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, and Vietnam, revealed that whilst retirement planning is a growing priority, many are ill-prepared for the financial demands of their later years.

A significant finding from the research is the reliance on cash savings for retirement income, with 25% of respondents expecting to draw from these funds. 

This approach may limit the potential to maximise retirement income, as many individuals are not leveraging investments to counteract inflation. In addition, 19% of working-age respondents do not contribute to any pension plan, which could leave them vulnerable in their later years.

The study also pointed to significant challenges facing current retirees. 

About 26% of retirees reported that they had not adequately planned for their expenses, leading to 20% being caught off guard by higher-than-expected costs, especially in healthcare and daily living expenses. 

Health concerns also weighed heavily on respondents, with 59% citing worries about physical decline in their later years. This concern could threaten their aspirations for a relaxing retirement, including spending time with family and engaging in travel.

As a result, many retirees have had to cut back on spending or liquidate investments.

The survey revealed that 23% of retirees regret their financial decisions, particularly for not saving enough (66%) or not investing adequately (52%).

The study also identified two distinct groups among respondents: "Gold Star Planners," who meticulously prepare for retirement, and "Retirement Rebels," who have little or no financial preparation. The Gold Star Planners, who save more than 10% of their income and have insurance and pension products in place, are more likely to manage their retirement expenses successfully and experience fewer regrets.

As Asia faces an ageing population, the findings emphasize the need for individuals to adopt comprehensive retirement planning strategies. This includes saving and investing early, as well as consulting financial professionals to ensure that their income keeps pace with inflation and rising healthcare costs.

As demographic shifts in the Asia-Pacific region continue, with one in four expected to be over the age of 60 by 2050, the survey underscores the urgency of proactive retirement planning.