As Thais live longer, traditional saving habits are proving increasingly insufficient to fund decades of retirement, according to Kasikorn Asset Management (K-Asset). With men expected to live to 85 and women to 88, individuals retiring at 60 face the prospect of financing 20 to 30 years without employment income. This longevity poses a significant challenge, as savings often fail to grow at a pace that can sustain such extended post-work lives.
Win Phromphaet, executive chairman of K-Asset, highlighted the core issue: “The biggest challenge for people living longer is their savings are not growing at the same pace.” He added, “Many underestimate how much money they will actually need after retirement.” This underestimation, coupled with inadequate savings growth, is creating a looming retirement crisis.
The inadequacy of current savings is stark. K-Asset data reveals that 48% of Thais have emergency funds covering less than one month of expenses, far below the recommended 3-6 months. The situation is even more dire for retirees: nearly 45% have no savings at all. Among those who have saved, over 64% possess less than 100,000 baht, while a mere 1% have accumulated more than 3 million baht.
These financial shortfalls have tangible societal consequences. Approximately 35% of retirees rely on financial support from their children, and another 33% continue working due to financial necessity. Government allowances, around 600 baht monthly, offer minimal assistance and fall short of covering basic needs. “These figures suggest that retirement insecurity is no longer a future concern — it is already affecting millions of households today,” stated Mr. Win.
Underestimating Retirement Expenses
A common pitfall in retirement planning is underestimating the cost of living after leaving the workforce. K-Asset estimates suggest a retiree needing 15,000 baht monthly for 20 years would require approximately 4 million baht. For those aiming for 20,000 baht per month until age 90, the target rises to about 5.5 million baht. Crucially, these figures assume a retirement portfolio yielding an average annual return of around 4%, designed to keep pace with an estimated 1.3% annual inflation.
Without sufficient investment returns, the required savings balloon significantly. Relying solely on cash or low-interest bank deposits, an individual needing 20,000 baht monthly for 30 years would need roughly 7.2 million baht. This stark difference underscores a critical point: “Saving money alone may be inadequate to fund your retirement,” Mr. Win observed.
The Risk of Stagnant Savings
For decades, bank deposits have been a popular savings choice in Thailand due to their perceived safety and accessibility. However, with deposit rates often below 1%, savings struggle to outpace inflation, leading to a gradual erosion of purchasing power. “The greatest retirement risk is not market volatility. It is the inability of savings to grow fast enough to support a retirement that could last 30 years,” Mr. Win explained.
Financial experts increasingly warn of two primary threats: longevity risk, the danger of outliving one’s savings, and inflation risk, the diminishing real value of cash over time. As life expectancy climbs, these risks become more pronounced and are often underestimated.
Strategies for Wealth Preservation and Growth
To combat these risks, financial planners advocate for diversified investment portfolios rather than concentrating wealth in cash or domestic assets. While Thai equities, bonds, and real estate are important, relying solely on them can limit long-term growth. Mr. Win advises considering broader diversification across geographies, sectors, and asset classes.
A well-rounded retirement portfolio might include international equities, fixed-income instruments, and alternative assets, tailored to individual goals and risk tolerance. Global diversification can also provide access to growth opportunities in areas like artificial intelligence, digital transformation, and healthcare innovation, which may not be fully represented in the domestic market.
Lifecycle Investing: Adapting to Age
Another common error is maintaining a static investment allocation throughout one’s working life. Many individuals select a plan, such as within provident funds, and rarely reassess it. This can lead to portfolios that no longer align with their age, objectives, or risk capacity.
Lifecycle investing offers a solution. This strategy adjusts investment risk as an individual ages. Younger investors (20s-40s) can typically afford higher exposure to growth assets like equities, potentially up to 85%, to maximize long-term wealth creation, as they have time to recover from market downturns. Around age 45, about 15 years before retirement, a gradual reduction in risk is recommended. “This period is often considered the optimal transition point,” said Mr. Win. “Reducing risk too early can limit long-term growth potential, while waiting too long may expose retirement savings to unnecessary market volatility.” By retirement age, equity allocations are often lowered to around 30%, with a greater emphasis on capital preservation and stable income generation.
Comprehensive Retirement Planning
As Thailand transitions into an aged society, robust retirement planning is paramount. The solution lies not just in saving more, but in a holistic approach combining disciplined saving with strategic, long-term investing. For those lacking investment expertise, professional financial advisors or diversified mutual funds can help construct portfolios suited to individual retirement goals and risk tolerance.
“The biggest retirement mistake is not simply failing to save enough. It is failing to make savings grow,” Mr. Win concluded. For a generation potentially facing three decades in retirement, financial security hinges on thoughtful investing, diversification, and adaptability in investment strategies over time.
