Help for migrant domestic workers from the team at Enrich HK!
Have you thought about what you will do when you retire? We often get asked by domestic workers about the ‘best time’ to plan for retirement, and they are usually shocked to hear our answer – that no matter what age you are, the best time to plan is now, even if you’re a new arrival to Hong Kong.
This might seem scary, but it doesn’t have to be, and it’s an important step to ensure that you’re not just ‘working hard,’ but also ‘working smart’ while you’re here.
THE 20:20 RULE
Without prior planning, retirement can be stressful and may bring up many unexpected expenses, but it’s never too late to start and we’ve listed some steps to consider.
Start off by visualising and writing down how you would like to spend your retirement. What lifestyle would you like? If you want to establish a business or invest, it’s important to also identify what you need to do to achieve those goals.
Think about what age you’d like to retire at. A good guideline to use is the 20:20 rule: If you hope to live 20 years after retirement, then you should build your funds from 20 years before retirement. This means that if your planned retirement age is 60 and you hope to live to the age of 80, you should ideally start saving retirement funds by age 40. This doesn’t include savings for your related goals (such as a business) which you should save separately.
Ideally, start saving now, so that you can prioritise your goals gradually. Every month when you receive your salary, ‘pay yourself first’ by putting aside money for your goals and investments before allocating your remittance and expenses. Build your emergency fund too – you will never regret setting aside a monthly amount for a rainy day.
Use your time in Hong Kong to develop skills that may support your retirement plan, and also look at any government programmes which can support you when you return home, including skills training, reintegration services, grants for small businesses or financial assistance.
Remember too, that your children and siblings are not your retirement plan. Plan for a future in which you are self-sufficient.
INVESTING FOR RETIREMENT
Most of us think about retirement as the time we will ‘stop working,’ but Filipino financial guru, Vince Rapisura, describes it as “the action or fact of leaving one’s job and ceasing to work [having accumulated] enough passive income that covers expenses to last a lifetime.”
So, it’s not enough to hope you can gather a big pot of savings for your retirement – it’s important to also have that ‘passive income’ that Vince talks about, which comes through careful investment. We’ve presented some ideas, but whatever you choose, make sure you research, shop around for options, pick reputable companies and never invest in anything unless you completely understand it – take less risk with retirement funds. Start off by looking into pension plans. If your country doesn’t have a government pension scheme, consider voluntary plans. If you’re from the Philippines, you already make a mandatory Social Security System contribution, but you could also consider voluntary pension funds offered by insurance companies, which may provide you with some fixed cash in the future. Filipino banks also offer Personal Equity and Retirement Accounts as part of a voluntary retirement savings programme with favourable tax treatment.
Explore government or private insurance plans for yourself and your family, based on your needs and budget. Health insurance covers short-term medical bills, whereas life insurance provides long-term coverage for your loved ones in the event of your death.
Consider investing in financial funds, such as a mutual fund or bonds, which are relatively low-risk investments, though we strongly advise you attend financial education courses to learn more about them first. It’s important to avoid scams. Another popular investment option is real estate. Besides ensuring a roof over your head, you can use property to generate passive income for instance by using it for business purposes, or apartment rentals.
Most importantly, don’t put all your eggs in one basket. Invest in a combination of plans which suit your needs and which will provide you with a comfortable and independent retirement.
Enrich HK is an awardwinning Hong Kong charity providing financial and empowerment education to migrant domestic workers.advice, planning for retirement