Sun Life Indonesia Survey: Challenges Of Inflation And The Need For Matang Financial Preparation For Retirement Period

Photo: Doc. Sun Life Indonesia

JAKARTA - Sun Life Asia's latest study entitled Pensiun dalam Perspektif Masa Kini: Siapunkan Diri untuk Mewujudkan Hari Tua yang Tenang dan Sejahtera mengungkap tantangan dan keluang dalam rencana pensiun di Asia. Studi ini dilakukan di tengah perubahan demografi signifikan di Asia Pacific, di mana diperkirakan satu dari empat penduduk akan berusia di atas 60 tahun pada tahun 2050.

This survey involved 509 respondents in Indonesia and more than 3,500 respondents in various Asian countries, including China, Hong Kong, Malaysia, the Philippines, Singapore, and Vietnam. The purpose of this survey is to understand the aspirations and practices of retiring among the Asian people.

Most Respondents Don't Have A Mature Pension Planning

The study revealed that the majority of respondents were not financially ready to face retirement. Although there is an increasing desire to achieve financial stability at dusk, many individuals delay retirement planning until they approach retirement itself. Survey data show that 67 percent of new respondents will start planning retirement funds within five years or less before retiring, while another 19 percent do not have a retirement plan at all.

Kah Jing Lee as Chief Client Officer of Sun Life Indonesia stated that social changes and an increase in life expectancy have affected the retirement planning process in Asia.

"Our survey shows that although awareness of the importance of financial sustainability in retirement is increasing, there is still a gap between awareness and real action of the community. In fact, the retirement plan that is prepared as early as possible is the key to achieving a prosperous old age," he said in a written statement, Tuesday, October 8.

Although the majority of respondents allocated at least 10 percent of their income to retire, unfortunately 27 percent of respondents did not allocate special funds for retirement, and the average respondents only relied on conventional savings of 23 percent to meet their financial needs in old age. This indicates the need to increase public financial literacy regarding the importance of comprehensive retirement planning, including asset diversification into more productive investment instruments.

Many Retireds Don't Expect Post- Retirement Living Fees To Be Higher And Regret Not Preparing It As Soon As Possible

This is an important note for future generations, where 25 percent of retirees admit that they do not prepare a budget for their retirement, and 11 percent do not expect that the cost of living will be much higher than expected. This figure is predicted to continue to increase in line with the increasingly pressing inflation.

For those who do not expect and have not prepared themselves, the main factor is the daily cost of living (80 percent) and the cost of health (53 percent). As a result, many of them have to reduce their expenses (67 percent) and reduce assets prepared for inheritance (47 percent).

About 13 percent of retirees expressed regret over the financial decisions they made at a young age, with the main reason not investing wisely (72 percent), followed by a lack of savings (39 percent) and not consulting a financial planner (39 percent).

The Young Generation Begins To Adjust Expectations By Delaying Retirement And Saving More

Interestingly, the younger generation is increasingly aware of the financial challenges in the future and is starting to adjust their expectations. Workers currently expect to retire at an average age of 65, five years slower than the current average age of retirees, who have stopped working at the age of 60.

In addition, 21 percent of those who have not retired have actively postponed their retirement plans, while currently only 13 percent of retirees are doing the same. This condition shows a change in economic conditions in Asian society.

The main reasons for delaying retirement also vary, including still enjoying work (64 percent), the desire to stay physically and mentally active at an old age (63 percent), and the need to save more for retirement (63 percent).

As many as 37 percent of the population planning to retire at an older age also said the increase in living expenses was their main reason, compared to the current 28 percent of retirees who postponed retirement for the same reason.

Retired Who Prepared Old Age Optimistic To Face Retirement Welfare, While Those Who Didn't Prepare Tend To Experience Difficulties

The survey reveals a striking difference between the two groups: those planning a thorough retirement as early as possible called the Gold Star Planners, and those who don't have a retirement plan at all called Retirement Rebels. The first group planned their retirement more than five years before retiring, saving more than 10 percent of their income for retirement, and completing protection with old-age insurance products.

When compared to those who do not have a retirement plan at all, a significant difference can be seen. In Asia, those who plan to retire carefully tend to remain within the expected expenditure limit (73 percent vs 31 percent) and less regret financial decisions after retirement (14 percent vs 40 percent).

Groups that prepare for retirement carefully also consult with pension planning consultants, including financial institutions and independent financial planners, and are more confident about their health and financial well-being in their old age.

For all respondents, the main aspiration for retirement is to spend quality time with family and friends (49 percent), followed by the desire to be free from work and relaxing routines (16%), and to give back to the community (15 percent). The biggest concerns regarding old age are health problems and physical declines (60 percent), factors that could jeopardize the achievement of these dreams.

"Ensuring the welfare of the elderly population continues to grow to be a challenge in itself for us. Although health is the most important pillar, it is also closely related to financial stability, productive work, and harmonious family and social relationships. Currently, we still have the opportunity to redefine how a peaceful and prosperous retirement period is. In other words, proactive education needs to be carried out so that the younger generation is now ready to face retirement with confidence through careful financial planning," concluded Kah Jing.