Get Ready for Your Retirement and the Education of Your Kids

Plan a Brighter Future for Young Families

31 March 2017


Get Ready for Your Retirement and the Education of Your Kids

Plan a Brighter Future for Young Families

Our Expert

Mr. Franky Cheuk

Director of Convoy Financial Services Limited

Get Ready for Your Retirement and the Education of Your Kids

Plan a Brighter Future for Young Families

As parents try to save money for their children to study abroad, many of them don’t know how to invest amid their busy lives. They may consider the dollar cost averaging approach and bond funds as long-term investment strategies.

Mr. Wong’s Financial Profile

Age 35
Occupation Physiotherapist
Marital Status Married
Family Member Wife:35 years old
son:5 years old
Father:deceased recently
Monthly Household Income Around HK$80,000
Monthly Household Expenses Around HK$50,000
(including mortgage payment, living expenses, tuition, insurance and tax reserve)
Monthly Surplus Around HK$30,000
Total Household Asset Around HK$3,940,000, including:
Cash: HK$1,000,000
MPF: HK$600,000
Other: estate of around USD$300,000 (HK$2,340,000) from his father
Risk tolerance Medium
Financial Goals/Concerns 1. Send his son to study in England
2. Retire before 60 years old

Busying with work, Mr. and Mrs. Wong have chosen to keep their money and assets in banks. However, the high inflation and near-zero saving rate have not only limited the asset growth, but also undermined their purchasing power. So they would like to reallocate their investment portfolio to achieve two financial goals: to send their son to study in England and to retire before turning 60.

Prepare an Education Fund with a Saving and Investment Plan

I would suggest Mr. and Mrs. Wong to take out some saving and invest in a saving plan with a monthly contribution of HK$20,000 so as to enjoy the potential market growth. The long-term investment approach and the dollar cost averaging method can effectively lower the investment risks, but they should be aware of the funds price fluctuation.

Assuming that the annual rate of return is 7%, when their son turns 18, they can withdraw HK$400,000 from the plan every year to cover the tuition fees and living expenses for four years. The balance will continue to accumulate.

Realize Liquid Asset Growth through Asian Bond Fund

In terms of asset allocation, they may consider to keep HK$200,000 as cash and invest the outstanding HK$800,000 cash in Asian Bond Fund for the approximately 5% annual yield. With a risk level of low to medium, the fund invests more than half of its assets in Asian government bonds and the remaining in Asian corporate bonds.

With a higher liquidity and flexibility comparable to savings, the fund offers a higher rate despite the potential movement in bond prices. When Mr. and Mrs. Wong reach the age of 60, the HK$800,000 investment and the dividends can grow to around HK$2.78 million.

Set up Pension through Universal Life Insurance

Last but not least, I would suggest Mr. Wong to put his father’s estate of USD$300,000 in a universal life insurance plan to create a source of income for his retirement.

Taking a universal life insurance plan available in the market as an example, the current annual interest rate is 3.4%, and the minimum guaranteed annual interest rate will be 2.8% after the 10th anniversary. It is expected that when they retire at 60, the policy value would increase to around USD$700,000 (around HKD5.46 million), realizing a growth of 130%.


If Mr. and Mrs. Wong do not prepare well for the future and continue to keep the money in banks (assuming that the annual rate of return of MPF is 4%, the value will be HK$4.7 million when they reach the age of 60), their assets would only be worth around HK$12.4 million when they retire. However, my suggested plan would help double their assets and offer them a total asset value of around HK$25 million, which would ensure them a carefree retirement.

Disclaimer: The above information is provided for reference only, and does not constitute any investment advice or offer. You shall not make any investment decision relying on this article.

The author has endeavoured to ensure the accuracy and reliability of all information (including data) provided, but the information shall not be interpreted as a guideline for consumers. The author and Convoy accepts no responsibility or liability for any loss or damages suffered by any person due to any inaccuracy or omission in respect of any information provided in the article. Different plans have respective terms and conditions which are stated by different product providers. Please refer to the respective principal brochures for detailed terms and conditions.