Longer lifespans are complicating retirement planning amid market uncertainty, inflation and rising healthcare costs, prompting Kasikorn Asset Management (K-Asset) to recommend investors shift their focus from wealth accumulation to income generation in retirement.
Win Phromphaet, executive chairman of K-Asset, said investors should prioritise capital growth during their working years before shifting towards sustainable income and risk management in retirement.
Thais reaching 60 have an average remaining life expectancy of about 22 years, heightening longevity risk as inflation and healthcare costs rise, he noted.
Speaking at an investment seminar jointly hosted by JPMorgan Asset Management, Mr Win said younger workers with long investment horizons and greater risk tolerance could focus on foreign and global equities, targeting annual returns of around 7%. After retirement, the priority shifts to generating regular income to cover living expenses while limiting volatility and losses.
K-Asset estimates average Thai life expectancy at 82, with healthy years extending to around 76. However, wealth for retirees may remain sufficient for slightly more than two years after retirement, raising the risk of depleted savings, he said.
Bank deposits or Thai bonds yielding around 1% a year could exhaust retirees' principal by age 78-79. An income-focused or lifetime portfolio could extend funding to about age 87.9, assuming the same initial capital and withdrawals, noted K-Asset.
The asset manager recommends allocating about half of a retirement portfolio to high-dividend stocks, real estate investment trusts (REITs) and infrastructure funds, targeting income or returns of around 4% a year to offset inflation.
These assets are less volatile than growth portfolios but may lag in strong rallies, Mr Win noted.
SELECTIVE OPPORTUNITIES
K-Asset favours foreign fixed-income assets. High-quality bonds rated AA or A offer yields of around 8% a year before fees, the highest in nearly 20 years, compared with yields of about 1-2% on Thai bonds. A holding period of at least 3-5 years is recommended.
Pressure for further US Federal Reserve interest rate hikes is easing as inflation and oil prices stabilise, potentially supporting longer-dated bonds. Longer-term bonds can cushion portfolios during economic slowdowns, while other assets help diversify against geopolitical risks.
For 2027, resilient economic activity and corporate earnings are expected to support markets despite geopolitical tensions, inflation and high interest rates. US-listed companies are expected to deliver earnings growth of around 15%. However, high bond yields could weigh on equity valuations. Investors should focus on fundamentals and earnings while monitoring inflation and interest rates, said Mr Win.
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K-Asset also favours Thai value and defensive stocks. Dividend yields are around 5-6%, while REITs offer 7-9%. Banking, energy, retail and telecom are sectors of interest, with potential supports include foreign direct investment, Thai ESG tax-saving funds and the proposed Thailand Individual Savings Account, which focuses on dividend-paying stocks.
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