Are you ready for the arrival of an advanced age society?

        Taiwan is moving towards an advanced age society, where most people are expected to live longer than expected, but the accompanying cost of living also creates another pressure. Follow this issue of the Finance Column to learn how to prepare for retirement early and ensure a comfortable and secure future.

                According to research by the National Development Council, Taiwan entered an aging society in 1993 and transitioned to an advanced age society in 2018. It is estimated that Taiwan will become an ultra advanced age society by 2025; As the proportion of elderly population to the total population continues to increase, it is estimated that it may exceed 30% by 2039 and reach 43.6% by 2070.

        Although Taiwan's elderly population, accounting for 17.6% of the total population in 2022, is still healthy, the fertility rate has continued to decline to 0.87, only surpassing South Korea and Hong Kong in major Asian regions. Under this trend, the proportion of elderly population to the total population is rapidly increasing. It is estimated that by 2050, Taiwan's proportion will be higher than Japan, Italy, the United States, and other countries, only slightly lower than South Korea, and will exceed 40% in 2057.

        Based on the aforementioned data, it is difficult to reverse the trend of Taiwan's society towards ultra advanced age. This means that by 2057, 40% of people around them will be over 65 years old, and everyone will face the risk of longevity (due to the financial risks associated with longer lifespans, which will increase over time). As the saying goes, "The most regrettable thing in life is when you leave, you can't spend all your money; the most tragic thing in life is when you have spent all your money and you haven't left yet!" This fully explains the difficulties behind longevity. Therefore, it is urgent to prepare retirement benefits early to reduce risks.

        There are generally three sources of accumulated retirement benefits for the salaried class: the government's retirement system (labor insurance pension/retirement pension/national pension), salary savings, and investment and financial management. Among them, the amount of retirement pension system is limited and fixed, and there is even a risk of bankruptcy, and the salary growth rate often cannot keep up with inflation. The only way to accumulate retirement benefits can only be through investment, but investment profits are not easy, and it is necessary to find an effective and relatively risk reducing way.

        Most people know that a regular fixed investment fund is most suitable for office workers to prepare for retirement. Its advantage is that automatic deductions from their salary account can force savings to invest. If discipline is maintained, they can accumulate and enjoy fruitful results over time.

        However, according to statistics, even with regular and fixed investments, people are still easily trapped in a cycle of chasing high and killing low. Looking back at February to November 2007, the Taiwan stock market challenged 10000 points from 7000 points, driving the number of fixed term employees to a historical high of 320000. Unexpectedly, it encountered a financial tsunami and collapsed by more than 50%; In January 2009, after the fixed number of people returned to a low of 200000, the Taiwan stock market surged by over 110% with the international stock market bottoming out, and the number of people returned to 290000. Subsequently, facing the impact of the European debt crisis, Taiwan stocks suffered another heavy decline, and the number of regular and fixed deductions continued to decrease in the following decade.

        In recent years, under the global low interest rate environment, Taiwan stocks have consistently broken through 10000 points, setting the longest bullish market in history with 10000 points. At the same time, it has also pushed up the number of fixed term quota holders back to 300000; In 2022, due to violent interest rate hikes in the United States, Taiwan's stock market fell by 30%, and there was a surge in regular quota deductions, dropping to 220000 people. Unexpectedly, in 2023, Taiwan's stock market rose to its intraday high of 17463 on July 31.

        The above history is believed to be of concern to many readers. Therefore, Far Eastern International Bank proposes a disruptive concept of fixed term investment - "choosing global targets with less volatility but stable long-term performance growth.". In the past, whether it was media, financial experts, or textbooks, they always recommended targets with significant fluctuations and long-term upward trends as a choice for regular fixed investment, in order to leverage the advantage of "average cost" (less deduction when rising and more deduction when falling). Although the concept is correct, it goes against human nature because people often, in order to avoid risks, decide to stop suddenly and only start investing when the market is bullish when they should increase their deductions during a downturn. From this, it can be seen that targets with low volatility and high accumulation can help investors overcome human weaknesses, make it easier to maintain disciplinary deductions, and enjoy sweet fruits in the future.

        You may want to re-examine your experience in regular and fixed investment, as well as your current investment targets, and consider adjusting to a fund with relatively low volatility and high accumulation. Perhaps it can improve your investment habits and save enough retirement funds as soon as possible!

        Image source: freepik

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