SINGAPORE (Feb 21): A survey of investors in Asia has revealed that millennials in the region are at substantial risk of a cash crunch during their later years, according to global financial services group Manulife.

Close to one-third of Asian millennial investors responding to the annual Manulife Investor Sentiment Index (MISI) survey say they expect to run out of money later on in life.

To make matters worse, some 39% of millennials expect healthcare to become too expensive during retirement, and 43% expect that their health will deteriorate to the point where they can no longer work. Despite these challenges, 71% of millennials expect to have to continue working beyond their retirement.

"It's sobering to see how many investors, especially young people, recognise that there are risks to their retirement," says Michael Dommermuth, Manulife’s head of wealth and asset management, Asia.

“Longer lifespans and later retirement will place increasing demands on investment funds, for which every investor should start planning ahead early for future protection,” he adds.

According to Manulife, a common rule of thumb is to accumulate around 25 times the amount one expects to spend in the first year of retirement. 

Yet the survey showed that, on average, millennial investors expect to accumulate just 8.2 times their annual income by the time they retire – well short of the "25 times" benchmark.

"Millennials may have been led to feel a sense of optimism for an improved post-retirement living standard, which is potentially misplaced.  Younger generations should plan strategically to begin accumulating wealth at early life stage," Dommermuth says.

To this end, the Manulife survey found that real estate continues to be a favourite means of seeking financial security among many investors, including millennials.

Nearly half of millennials who intend to purchase local property across Asia do so with the intention of generating rental income from it.

However, Manulife warns that their expectations of a return may not reflect the diverging fortunes of the real estate market within the region.

"Younger investors looking to address their retirement shortfall should reconsider their investments in the context of rapidly maturing – or already mature – real estate markets,” Dommermuth says, adding that economic and demographic shifts warrant “a different approach” from that favoured by previous generations.

"Millennials whom invest in emerging Asia will likely fare better than those who buy a home in maturing Asia, where slowing growth and ageing populations can dampen real estate markets,” he says.