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1 How Can Ordinary People Plan for Retirement Investment?#

Before discussing the main content, I want to talk about why we should invest for retirement.
I believe the goal of retirement investment is to provide us with a form of security after we retire, which includes our life and living standards.
First of all, after retirement, the greatest risk that people face in their old age is the risk of illness. The incidence of major diseases is increasing, and once someone falls ill, it is highly likely to burden the entire family.
This is a real and difficult social reality, so there must be a part of the pension that guarantees medical care.
Secondly, basic living security is definitely necessary, and we all hope that our quality of life does not decline as we age.
Especially for our generation, we have all experienced a somewhat carefree urban life when we were younger. If we have to start living on plain food after retirement, I believe many people would find it unbearable.
Ultimately, planning for retirement should achieve two goals:
First, to ensure that we can afford medical care when we are old;
Second, to maintain our quality of life.
Since retirement planning is so important, what should we do?
Let me share my thoughts.
From the current top-level design of our country's pension security system, a three-pillar pension security system has been formed, with basic pension insurance as the first pillar, enterprise annuities as the second pillar, and commercial pension insurance as the third pillar.
However, we are currently still in a situation where the first pillar is dominant (state-mandated, widely accepted by the people), the second pillar is lacking (neither employers nor employees are interested), and the third pillar is weak (the public does not buy into it).
Especially for ordinary people born between the 1980s and 2000s, when they retire, they will face severe population aging, with more people sharing the pie, while the number of young people is decreasing, leading to fewer people to support the pie, which will create enormous pressure on pension distribution.

I believe these generations should plan their retirement security in advance.
Retirement investment planning can start with the following four steps:
First, pay pension contributions.
The first step is to pay the full amount of your basic pension insurance.
There has been ongoing debate online: "If you don't pay pension contributions but save the money yourself, you will have greater returns after retirement."
In fact, calculations show that this is a fallacy.
On one hand, not every investment will succeed; on the other hand, most people's return growth cannot keep up with the growth rate of social average wages. You may think that earning a few thousand more a month is a lot now, but who knows how much it will be worth in twenty years.
Although future pensions face considerable pressure, basic pension insurance remains a relatively good system. It may not guarantee you a good meal when you are old, but it will certainly ensure that you have food to eat, which is enough for most people.
Second, invest steadily to ensure asset appreciation.
Basic insurance determines the lower limit of the quality of life in old age, while investment appreciation determines the upper limit of living quality.
Here are some pitfalls that cannot achieve stable value preservation:

1. Keeping all your money in the bank, which will gradually depreciate. Low interest rates on demand deposits and inconvenient withdrawals for fixed deposits are inherent flaws of bank savings, which are slowly being phased out by the times.

2. Buying various insurance products. It's not that you can't buy them, but there should only be one reason for buying these products—because you need them. Unfortunately, most people are misled by friends, classmates, and relatives.

3. Treating financial management as speculation and gambling. Without professional financial knowledge, it's better to avoid those financial leverage tools; otherwise, losing everything can happen in an instant, as they gamble on luck rather than opportunity for ordinary people.

4. P2P products. It's best to avoid them; they are mixed and not suitable for retirement investment.
   I believe the best way to achieve stable appreciation is to allocate fixed-income products. Pensions should primarily focus on stability, but they must outperform inflation.
   For investors, many people choose high-dividend stocks, bonds, or large-cap indices as stable investment options. I think this is also feasible, but the premise is that one must have the ability to profit.
   Third, reasonably allocate commercial insurance.
   This varies from person to person. The original intention of insurance is to hedge against future financial risks, which is also the only purpose of purchasing insurance.
   Other than that, regardless of how others boast, it is advisable to be cautious in purchasing.
   The order of purchasing commercial insurance should be: the family's mainstay (the highest or most stable income earner) >> the family's secondary support >> the children.
   Generally, there is always one adult in the family who has the highest or most stable income, and their income sustains the family's expenses. If this person is healthy and has a stable income, the family's economic income is secured. If this person faces a crisis, it would be like the foundation collapsing, which would be a devastating blow to the family.
   There are often news reports about crowdfunding and mutual assistance, and there are countless examples of families being destroyed.
   In fact, many families' insurance purchasing order is just the opposite, with adults not insured and first buying education insurance and accident insurance for the children. Even if something unfortunate happens to the child, the biggest impact is emotional, and financial compensation is of little use. But what if the adult faces an accident?
   Additionally, some people ask why insurance is not purchased for the elderly. Because it's not cost-effective.
   In fact, for elderly people over 60, either the types of insurance are very few, or the premiums are much higher than for younger people. When the premium and the benefits are not significantly different, the significance of purchasing insurance is really minimal; it is easier to save.
   Fourth, prepare for the unexpected.
   Although it's never too late to mend the fold after the sheep are lost, preventing problems before they occur is a higher realm.
   To have a rich and colorful old age, one must prepare the following four points in advance:

5. Scientific diet. This needs no further explanation; everyone is increasingly demanding healthier diets.

6. Regular exercise. It is said that retirement is expensive, but for ordinary people, it is better to exercise well; otherwise, they may not even be able to collect their pensions.

7. Regular health check-ups. According to the Ministry of Health's recommendations, adults should generally have a health check-up once a year, while the elderly should have one every six months.

8. Balance work and rest. This principle is well understood, but it should be noted that leisure does not equal indulgence or unrestrained entertainment.

Effective entertainment is built on physiological, emotional, and demand aspects. It is recommended to make more positive friends, engage in beneficial physical and mental activities, and expand one's social circle.

The purpose of retirement investment is to ensure that there is enough money to guarantee one's life and health at retirement. If one is capable, many people can even retire early or prioritize financial management to ensure a comfortable retirement life.
However, no matter what, one must plan for retirement investment in advance, with a focus on stability.

2 What Can I Use to Supplement My Pension?#

I believe that people have a life age limit, and the transition from youth to old age is an inevitable stage for everyone; this is an unavoidable natural law. In youth, people can obtain certain returns through physical labor, work, entrepreneurship, and investment, but the options become fewer when they are old and retired.
Every time I see elderly people selling goods on the street, I wonder: what will I be like when I grow old? What kind of life do I want? How should I plan my investments while I am still young, so that when I retire one day, I might have some security?
Perhaps my retirement planning is aimed at pursuing a better investment life.
While I am still young, I prefer a diversified allocation of major asset classes in my investment strategy. I will not invest all my money in equity assets, but will increase the allocation of pension target funds according to future aging needs. I think this is my personal retirement plan.
How about everyone else's retirement planning? Have you added an extra "pension" for yourself? Next, I want to discuss the current state of pensions in our country and my understanding and recognition of pension target funds.

1. What is the current state of pensions in our country?
   From the national attitude towards pension issues, the main focus is on family-based elderly care, strengthening social pension insurance, introducing commercial pension insurance, public pension funds, etc., to establish a multi-form coexistence pension security system.
   Currently, the state of pensions in our country primarily consists of three basic pension methods: social pensions, family pensions, and self-savings pensions.

2. Social pensions: Currently, social pensions have relatively poor benefits, especially in rural areas, where the social pension system needs to be popularized and improved. The current state of social security promoted by the state is characterized by wide coverage, low guarantees, ineffective cost control, low operational efficiency, and unfair security systems, resulting in either no coverage or basic insecurity for some people.

3. Family pensions: This is currently the most common form of pension and reflects the traditional virtues of the nation. Under the existing economic conditions and traditional cultural models, family pensions remain the mainstream pension method in Chinese families.
   Relevant data shows that in the total economic sources of the elderly population, the portion provided by children accounts for 16.8% in cities, 38.1% in county towns, and is even higher in rural areas. This indicates that child support holds a certain position among urban elderly, while in rural areas, it occupies an important or even primary position.

4. Self-savings pensions: Relying on regular savings for old age, there is still a certain market in both urban and rural areas. According to a survey by the State Council's Economic Development Center on rural areas, 30% of families have lost confidence in relying on children for old age, believing that only controlling their own finances is the most reliable. Therefore, they try to save as much as possible for old age. However, low interest rates, high inflation, astronomical medical expenses, and the high cost of living in the future make saving for retirement increasingly difficult.

5. Why plan for retirement?
   It is important to understand that people will inevitably grow old, which is an objective and irreversible trend. The direct consequence of aging is the gradual loss of various abilities to secure living conditions. So, when the elderly who have contributed to society gradually lose their ability to survive, who should extend a helping hand to provide material and spiritual support? This is the issue of pensions.
   The problems with pensions include: shrinking family size, weakening family functions; accelerated population mobility, severe intergenerational tilt; extended life expectancy of the elderly, decreased self-care ability, and the reality of traditional lifestyles being impacted.
   With the gradual establishment of a market economy and the modernization of the social economy, as well as population mobility, traditional family pensions are beginning to face many challenges. For example, in 1995, the national average family size was 3.9 people per household, while the fifth national census in 2000 showed it was 3.44 people per household, and by 2005 it was 3.13 people per household. The family structure has also shifted to a core family model, with complete core families consisting of parents and unmarried children accounting for 57.81%. The shrinking average family size and the increase in complete core families have led to a continuous increase in pure elderly households.
   In modern society, population mobility is increasing rapidly. Young people, under competitive pressure, are busy with work and careers, leaving them little time to care for their elderly parents. At the same time, some young couples place great importance on their children's education and growth, directing their limited time, energy, and financial resources toward their children, resulting in a phenomenon of "valuing the young over the old," which negatively impacts the mental health and actual quality of life of elderly parents.
   The average life expectancy of the elderly is increasing, along with rising morbidity and disability rates, and declining self-care abilities. As social living standards continue to improve, the life expectancy of the elderly is also increasing. However, as age increases (especially after 75), the health status of the elderly tends to deteriorate, with rising morbidity and disability rates and declining self-care abilities, all of which will increase the burden on families and lead to a rise in negative emotions among young people regarding supporting the elderly.
   Forty years ago, the ratio of elderly people to children in China was 1:6. Data predicts that by 2050, the population aged 60 and above will account for 31% of the total population in China, meaning the ratio of elderly to children will change to 2:1. A "silver-haired China" is approaching us, and the traditional concept of relying on children for old age has been impacted by "aging." How long can we continue to rely on family pensions?

6. What pensions might there be?
   According to the design of the new system, pensions for employees after retirement are divided into two parts:

• The first is the basic pension, with a monthly standard of 20% of the previous year's average monthly salary of employees.

• The second is the personal account pension, with a standard of 1/120 of the accumulated savings in the personal account paid monthly. In addition, the state will provide transitional pensions for "middle-aged" retirees, but the formulation and issuance standards for transitional pensions have not yet been clarified in the new policy.

• The formula for calculating pensions: Basic pension for "middle-aged" retirees = basic pension + personal account pension + transitional pension. The specific calculation is the average monthly salary of employees in the city in the year before retirement × 20% (for those with less than 15 years of contribution, it is calculated at 15%) + the principal and interest of the personal account ÷ 120.

For example: Mr. Wang, a resident of Guangzhou, is a "middle-aged" retiree with an average monthly salary of 3000 yuan and a pension contribution period of 10 years. Assuming that the average monthly salary in Guangzhou is 3000 yuan after 10 years, how much pension will he receive after retirement?
After the personal pension account's contribution rate is adjusted from 11% to 8%, Mr. Wang can receive a monthly pension of = 3000 yuan × 15% + 3000 yuan × 8% × 12 × 10 ÷ 120 = 690 yuan after retirement.
Among them, (3000 yuan × 15%) is the basic pension; (3000 yuan × 8% × 12 × 10 ÷ 120) is the personal account pension. The personal account scale has been adjusted from 11% to 8%. The unit's contribution will not decrease, and overall retirement benefits will not decrease.

Currently, the characteristics and differences of the "three pillars" of our country's pension security system are as follows:

• The first pillar is basic pension insurance, characterized by wide coverage, but its main role is to provide basic living security after retirement, with a low pension replacement rate.
• The second pillar is enterprise (occupational) annuities, but the coverage is too small to form an effective supplement.
• The third pillar is personal commercial pension accounts, which can provide additional supplements to pensions beyond the first two types of pension income.

According to statistics, the first pillar currently dominates, with a scale exceeding 6 trillion yuan, accounting for as much as 70%, while the scale of the second pillar is only 2 trillion yuan, and the third pillar has just started and is relatively small.
In fact, with the acceleration of the aging process in our country, the first pillar is becoming increasingly difficult to meet people's demand for high-quality retirement life, especially since nearly 500 million people currently do not have basic pension insurance, most of whom are young people. And youth is precisely the stage for preparing for retirement; the earlier the retirement investment, the better the wealth appreciation and compound effect.
According to data, the replacement rate of the average monthly basic pension in our country is less than 45%, and it has been declining year by year. Therefore, the demand for individual investment in pensions is very urgent, and it is also currently encouraged by national policies to develop personal pensions.
The pension replacement rate is one of the basic indicators for measuring the difference in the level of living security before and after retirement, referring to the ratio of the pension level received by workers at retirement to their pre-retirement wage income level. According to the World Bank, pensions must reach 70-80% of pre-retirement income for the welfare and quality of life of the elderly not to decline.
Therefore, developing the third pillar is the trend of the future pension market, and it is also a way for ordinary people to better enjoy additional pension benefits and prepare for personal retirement planning in advance.
4. Why choose pension target funds, and what is their uniqueness?
With the changes in our country's policies and the issuance and continuous deepening of pension target funds, the expansion of domestic pension financial products has been further supported, laying a solid foundation for the third pillar of pensions.
For example, in April of this year, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pensions," which pointed out that the state will formulate tax incentives to encourage eligible individuals to participate in the personal pension system and receive personal pensions according to regulations. On September 26, the State Council's executive meeting decided to implement personal income tax incentives for policy-supported, commercially operated personal pensions: for contributors, a pre-tax deduction of up to 12,000 yuan per year will be allowed, and investment income will not be taxed temporarily, with the actual tax burden on income reduced from 7.5% to 3%.
Looking at the situation in overseas countries like the United States, tax incentives are often a common practice to promote the development of the third pillar of pensions and are the core driving force behind the development of the third pillar of pensions, bringing more investment opportunities for personal pensions. I believe this is also one of the reasons for choosing pension target funds.
At the same time, with the rapid development of pension target funds, they have become an important force in the development of the third pillar of pensions. Pension target funds refer to an innovative type of public fund that aims for the long-term stable appreciation of pension assets, encourages investors to hold for the long term, adopts mature asset allocation strategies, and reasonably controls the volatility risk of investment portfolios.
Pension target funds have certain uniqueness and differ from general funds:

1. Different fund names must include the words "pension target."
   According to the "Guidelines for Pension Target Securities Investment Funds (Trial)," pension target funds must include the term "pension target" in their fund names and reflect the fund's investment strategy, while other public funds are not allowed to use the term "pension."
   

Therefore, for most novice investors, they can easily find relevant pension target funds directly through the fund name, which distinguishes them from general public funds.
2. Different investment objectives, mainly investing in funds.
From the perspective of investment objectives, pension target funds should operate in the form of fund-of-funds (FOF) or other forms recognized by the China Securities Regulatory Commission.
Fund-of-funds, as we commonly refer to, invest in various funds as investment targets, indirectly holding assets such as stocks and bonds through holding other securities investment funds.
In contrast, general funds invest directly in stocks, bonds, and other assets. Compared to general funds, pension FOFs have relatively lower risks, as they reduce non-systematic risks through selective funds.
3. Different investment strategies can be formulated according to pension targets.
From the perspective of investment strategies, pension target funds have their unique investment strategies, which is a major distinction from other funds. For example, funds adopting a target date strategy should gradually reduce the allocation ratio of equity assets and increase the allocation ratio of non-equity assets as the target date approaches.

Funds adopting a target risk strategy should set benchmark allocation ratios for equity and non-equity assets based on specific risk preferences or use widely recognized methods to define portfolio risks (such as volatility) and take effective measures to control fund portfolio risks.
4. Different investment periods, with a minimum of no less than 1 year.
In terms of investment periods, pension target funds also have their uniqueness. Pension target funds should adopt a periodic open operation method or set a minimum holding period for investors that matches the fund's investment strategy. The periodic open closed operation period or the minimum holding period for investors of pension target funds should not be less than 1 year.
The advantage of this restriction is that it helps guide investors to hold for the long term, thereby increasing the probability of investment success and pursuing the long-term stable appreciation of pension assets.
5. Advantages of investing in pension target funds?

1. Pension target funds are managed by professional teams.
   The main purpose of pension products is generally to accumulate funds and improve expected returns. Although investing in funds also carries risks, professional management alleviates concerns, eliminating the need to research the fund market and reducing unnecessary troubles, allowing one to work with peace of mind.
   After all, pension fund investments are relatively long-term, primarily managed by strong domestic public fund management companies, whose professional levels and management capabilities are time-tested and can provide investors with relatively stable long-term returns.
2. Pension target funds offer higher flexibility.
   Compared to other commercial pension insurance or social insurance, pension target funds offer higher flexibility. Although there are certain holding period requirements, outside of the holding period, investors can freely subscribe and redeem to meet temporary funding needs or change product needs.
   In contrast, other social insurance or social pensions generally do not allow for withdrawals at any time, have lower flexibility, and longer payment periods, making it difficult to meet the needs of modern life.
3. The investment operation of pension target funds is as open and transparent as ordinary funds.
   For example, the investment of national basic pensions, enterprise annuities, occupational annuities, and commercial pension funds generally lacks clear understanding of the products and their operations.
   Funds operate in a standardized manner in the market, with transparent investments, temporary or periodic reports, and timely updates of information disclosures. Investors can better understand the operation status of their funds when investing in pension target funds, allowing for more reasonable planning in line with personal pension needs.
4. How to obtain additional pensions?
   I believe the best way for ordinary people to invest in pension FOF funds is through regular investment, which is also an additional pension that novice investors can have. Regular investment generally refers to periodic fixed-amount investments, where a fixed amount is invested in a fixed fund at a fixed time. This can be treated as a specific pension plan, not affecting the use of personal daily funds and other investments, thus reducing risks.
   If investors have already made investment plans and have funds aimed at retirement in regular investments, but the regular investment funds are not pension FOF funds but general funds, they can consider switching to regular investments in corresponding pension FOF funds based on their risk needs and age stages.
   For some ordinary people who do not have basic pension insurance or enterprise annuities, how can they talk about retirement? Especially in the past, there was a concept in China of relying on children for old age, where young people worked outside, and when they got older, they returned home to "retire," creating a cycle. This was a phenomenon in some aspects of Chinese society in the past.
   The times have changed; retirement investment is becoming more scientific. Since 2022, the state has issued "Opinions on Promoting the Development of Personal Pensions," clearly stating that tax incentives will be leveraged to encourage individual investors to make more choices for their retirement, further promoting the development of the third pillar and personal pension funds, bringing long-term stable capital increments to the domestic capital market while enhancing the public's awareness of retirement investment.
   Data predicts that by 2030, personal pensions may welcome an incremental capital increase of 1 to 3 trillion yuan; at the same time, referring to the experience of IRA accounts in the United States, the proportion of investments in public funds can reach 10% to 30%, and personal pension investments can bring an incremental increase of 10 to 35 billion yuan to pension target funds each year.
   Therefore, it is still necessary to add an extra pension for oneself in today's life. To ensure that one has support in old age and does not have to struggle for money, it is essential to plan ahead for the kind of retirement life one desires. Although plans may not keep up with changes, retirement investment must keep pace with the times.
   Risk Warning: The name "pension target" does not represent a guarantee of returns or any form of income promise. Pension target funds do not guarantee principal, and losses may occur. Investors must understand that pension target funds are only part of a complete retirement plan, which includes basic pension insurance, enterprise annuities, and personal pension investment products. Therefore, this fund does not guarantee sufficient retirement income during retirement, and the net asset value of the fund shares fluctuates with the market.

Retirement Investment Planning#

1. The primary goal of investment should be retirement.
   In the European and American markets, the main goal for investors buying funds is retirement. For example, the 401K and IRA accounts in the U.S. are designed to encourage everyone to invest for retirement. Initially, it was the companies responsible for their retired employees, as companies had longer lifespans than people; as companies' lifespans have become shorter, it has gradually shifted to individuals providing for their own retirement.
   Wang Jingbo is currently 40 years old and plans to retire at 60, allowing for another 20 years of investment. According to investment masters' "ten years tenfold" investment capability, they can profit a hundredfold in twenty years. The current 1 million yuan in their hands can become 100 million yuan in twenty years. Wang Jingbo's requirement is relatively low, "tenfold in twenty years" is sufficient. To achieve "tenfold in twenty years," I must achieve an annualized return of 12.7%. Let's aim for an annualized return of 15% for Wang Jingbo's investment goal. One million yuan at 40 years old can become 10 million yuan at 60, which should be enough for retirement!
   I mainly buy funds in my own account, and the goal of buying funds is also retirement, which makes for a better mindset.
2. The significance of retirement investment.
   Everyone talks about how the U.S. has had a bull market for the past twenty years. In fact, this is closely related to its pension system.
   The Chinese stock market lacks long-term funds because everyone invests for short-term profits, flooding in like a torrent and rushing out just as quickly.
   Think about it: in the U.S., every month when salaries are paid, millions of workers have a portion of their salaries go into 401K and IRA accounts, which are then invested in U.S. mutual funds. In turn, these mutual funds invest in the U.S. capital market. Thus, the U.S. capital market has a continuous influx of funds, which has led to nearly twenty years of slow bull markets.
   Now look at the major shareholders of the S&P 500 index components; most are public fund giants like BlackRock, Vanguard, and State Street Global. Some social security funds in China also enter the stock market, but that is only a small portion of the savings from social security.
   Currently, the market is at the bottom, and most are likely at a loss. Now, when talking about retirement investment, most people seem to think that making money from funds is hopeless. But conversely, does buying funds in a bull market increase the probability of making money in the future? Wang Jingbo believes that there will be more and more smart investors.
3. How to understand: the personal pension tax burden is reduced from 7.5% to 3%?
   Recently, it has been widely reported: "For policy-supported, commercially operated personal pensions, personal income tax incentives will be implemented: contributors will receive a pre-tax deduction of up to 12,000 yuan per year, investment income will not be taxed temporarily, and the actual tax burden on income will be reduced from 7.5% to 3%."
   However, there has been no relevant explanation. Wang Jingbo will analyze it for everyone:
   (1) A pre-tax deduction of up to 12,000 yuan per year.
   If investors purchase funds, insurance, or other pension products through personal pension accounts, they will receive a certain tax exemption amount, with a limit of 12,000 yuan.

So how much tax can be saved?

For example, if Wang Jingbo's annual income is 100,000 yuan, the applicable annual income tax rate is 10%. If I buy 12,000 yuan worth of funds through a personal pension account, I can reduce 12,00010% of the income tax, which is about 1,200 yuan, equivalent to buying funds at a 10% discount.
For those with an annual income exceeding 1 million yuan, the applicable annual income tax rate is 45%. If they buy 12,000 yuan worth of funds, they can reduce 12,00045% of the income tax, which is about 5,400 yuan, equivalent to buying funds at a 55% discount. In fact, this is quite attractive for high-income individuals.
(2) Investment income is temporarily not taxed.
In the U.S., money earned from investing in stocks and funds (including capital gains and dividends) is subject to tax. Currently, the money earned from stock trading and fund investing in our country is not taxed. If stock dividends are held for less than a year, tax is required; if held for more than a year, no tax is required. Fund dividends are also not taxed.
The regulations in our country over the past few decades have been "temporarily not taxed." Many people think "temporarily" means it is temporary, but in fact, this "temporary" has been in place for twenty to thirty years. The key implication of this word is that it is currently not collected, but it does not mean it will not be collected in the future; how long this future will be is uncertain.
(3) The actual tax burden on income is reduced from 7.5% to 3%.
The U.S. 401K and IRA accounts are tax-deferred, meaning that when money is deposited into the account, it is tax-free, but taxes are paid when withdrawing from the account after retirement. When young, income is high, corresponding tax rates are high; when older, spending less and withdrawing less corresponds to lower tax rates, which is also a form of tax incentive policy.
So what is the origin of "the actual tax burden on income is reduced from 7.5% to 3%"? Wang Jingbo specifically asked someone knowledgeable and also checked the information.
In 2018, a pilot program for commercial pension insurance was launched in Shanghai, Suzhou, and Xiamen, where purchasing pension insurance was exempt from tax, but taxes were still required upon withdrawal, with 25% exempt from tax and 75% taxed at 10%. In this case, the actual tax burden is 7.5%. When it comes to personal pension accounts buying funds, "the actual tax burden on income is reduced from 7.5% to 3%," Wang Jingbo estimates that 25% is exempt from tax, and 75% is taxed at 4%, resulting in an actual tax burden of 3%.

4. How should fund investors plan for retirement investment?

Currently, the issue of population aging has become a focal point of discussion, and at the same time, the need to face the issue of retirement planning arises. In this article, we will discuss how fund investors can plan for retirement investment.

For pensions, the basics include "basic pension insurance" + "enterprise annuity/occupational annuity." If there are also savings-type pension insurance or commercial pension insurance, then the cash flow sources during retirement will be relatively rich. However, these all belong to the "extension of occupational ability" during youth. Attending a good university while studying and finding a high-paying job after graduation will lead to richer pension insurance resources. This article mainly discusses the issue of retirement investment planning.
In my personal understanding, "retirement investment" has the following characteristics:

a. Risk preference weakens.
This is very understandable; as people age, their risk preferences naturally weaken, and they pay more attention to potential investment risks. Therefore, retirement investment planning cannot be entangled in stocks every day; investment categories should lean towards bond-type assets and broad-based indices.
b. Research and investment ability weakens.
This is also easy to understand; after all, as one ages, there is less energy, and one may also need to help children with grandchildren, and memory may decline. New emerging sectors may also become difficult to understand, making bond-type assets and broad-based indices more suitable, as they do not require much research ability.
c. Ability to withstand fluctuations weakens.
As one ages, it becomes increasingly difficult to withstand net value fluctuations of 20% or more; the heart cannot take it. Bond-type assets have relatively low volatility, so one should choose pure bond funds. Choosing bond funds with a large number of convertible bonds will also lead to significant volatility. At the same time, the volatility of broad-based indices is still too high for retirement investment planning, so the proportion of broad-based indices in asset allocation should be smaller, while pure bond funds should occupy an absolute majority.
d. Greater emphasis on absolute returns and cash flow.
For retirement investment planning, since there is no work income, daily expenses require cash flow, so liquidity issues must also be considered. At the same time, the goal of retirement investment planning is absolute returns; achieving real absolute profits every year is more beneficial for the mindset regarding retirement investment.
Based on the above four points, my retirement investment planning proposal is:
5% flexible access money market funds + 70% pure bond funds + 25% enhanced funds of the CSI 300 index.
I will introduce the specific content in parts:
I. 5% flexible access money market funds mainly contribute liquidity:
As mentioned earlier, since there is no work income, daily expenses require cash flow, so liquidity issues must also be considered. Flexible access money market funds have excellent liquidity, allowing for withdrawals whenever cash is needed. Currently, most bank money market funds yield about 2%, and 5% of money market funds can contribute an annualized return of about 0.1%. It is sufficient to choose just one money market fund without too many requirements, as long as it is flexible and convenient. Note that money market funds should not be overly allocated; on one hand, basic pensions can contribute part of the cash flow, and on the other hand, even if money market funds are insufficient for short-term needs, since we allocate pure bond funds, the net value drawdown is minimal, and if a large amount of cash is needed in a short time, we can rely on selling part of the pure bond funds to make up for it, without being "stuck" like stock funds. Moreover, the absolute returns contributed by pure bond funds can be sold annually to supplement the savings of money market funds.
II. 70% pure bond funds mainly contribute absolute returns:
The 70% pure bond funds contribute the majority of returns. It is advisable to select 2-3 pure bond funds for diversified allocation, ensuring that they are pure bonds, as the underlying assets should not contain a large number of convertible bonds. The volatility of convertible bonds is not much lower than that of stocks. For example, the FuGuo Credit Bond A (F000191) has a 5-year yield of 28.11%, equivalent to an annualized yield of 5.08%, and its net value curve is very stable with minimal drawdown.
Similarly, the Bosera Credit Bond Pure Bond A (F050027) has a 5-year yield of 24.71%, equivalent to an annualized yield of 4.5%, and its net value curve is also very stable, making it very suitable for retirement holding.

Pure bond funds have an approximate annualized yield of 4.5%-5%. If we average it to 4.8%, then 70% pure bond funds can contribute an annualized yield of 3.36%. The reason we allocate a large amount of pure bond funds is to smooth the overall net value fluctuations of the portfolio, and most importantly, pure bond funds can contribute absolute returns each year to supplement the savings of money market funds, ensuring that there will not be a situation where cash flow is insufficient during retirement.
III. 25% enhanced funds of the CSI 300 index mainly contribute elastic returns:
With 5% of money market funds supplementing liquidity, and 70% of pure bond funds contributing absolute returns to supplement the savings, the basic cash flow expenses during retirement are resolved. The remaining funds need to consider appreciation, but the volatility should not be too high, and there should be no need to invest too much energy in research. At this point, enhanced index funds of broad-based indices are a good choice. For example, one can choose 2-3 enhanced funds of the CSI 300 index for diversified allocation. Let's look at the situation of the CSI 300 index enhanced funds in the market. For instance, the Invesco Great Wall CSI 300 Index Enhanced A (F000311) has been established for 8 years and has a yield of 159.75%, equivalent to an annualized yield of 11.2%.
Another example is the Huaxia CSI 300 Index Enhanced A (F001015), established for 7 years and 251 days, with a yield of 73.08%, equivalent to an annualized yield of 7.4%.

Currently, the CSI 300 index is overall at a historical valuation bottom, so the yield is slightly lower. By diversifying into 2-3 excellent enhanced CSI 300 index funds, there is a high probability of achieving an annualized yield of around 10%. The 25% allocation of enhanced CSI 300 index funds can contribute 2.5% annualized yield, but enhanced CSI 300 index funds cannot contribute absolute returns as steadily as pure bond funds, requiring patience for long-term holding, which is why only 25% of the allocation is made in the portfolio.
Thus, the combination of "5% flexible access money market funds + 70% pure bond funds + 25% enhanced CSI 300 index funds" is expected to yield an annualized return of around 6%, which is a decent return. Importantly, it resolves liquidity and absolute return issues while maintaining a relatively good expected return, and the portfolio's volatility is relatively low, requiring minimal effort for management and research, making it a good retirement investment planning solution for fund investors.

5 A Brief Discussion on the New Personal Pension Policy and Target Pension Funds#

1. What is the current situation of pensions in China?
   Currently, our pension system includes basic pension insurance funds, enterprise occupational annuities, and personal pensions as the three pillars. The first pillar, basic pension insurance funds, dominates, accounting for as much as 58.0% in 2021. The second pillar, enterprise occupational annuities, is mainly composed of central enterprises, state-owned enterprises, and government departments, with a narrow coverage. The third pillar, personal pensions, started relatively late but has enormous potential. In April 2022, the State Council issued the "Opinions on Promoting the Development of Personal Pensions," officially launching the personal pension account system.
   First pillar: By the end of 2021, the accumulated balance of basic pension insurance funds reached 6.4 trillion yuan, a 10.2% increase from the same period last year. In terms of asset allocation, basic pension insurance funds focus on balancing safety and returns. In terms of asset structure, investments held to maturity and trading financial assets are the main investment directions of basic pension insurance funds, with the two accounting for 91.5% in 2021. At the same time, the proportion of bank deposits has significantly increased, rising from 0.9% in 2017 to 2.8% in 2021, reflecting the investment characteristics of basic pension insurance funds that balance safety and returns.
   
   Second pillar: By the end of 2021, the total scale of the second pillar pensions in China reached 4.5 trillion yuan, with enterprise annuities at 2.64 trillion yuan and occupational annuities at 1.86 trillion yuan. In December 2020, the Ministry of Human Resources and Social Security issued a notice on adjusting the investment scope of annuity funds, raising the proportion of equity assets by ten percentage points to 40%. As of the first half of 2022, the amount of fixed-income assets was 329.32 billion yuan, accounting for 12.2%; the amount of equity assets was 23.7739 trillion yuan, accounting for 87.8%.
   Third pillar: As of August 2022, the total scale of investable financial products for personal pensions in China was approximately 190 billion yuan.

2. What can be invested in the third pillar of personal pensions in China?
   According to the "Opinions on the Development of Personal Pensions," funds in personal pension accounts can be used to purchase safe, mature, stable, and standardized financial products that meet different investor preferences, such as bank wealth management, savings deposits, commercial pension insurance, public funds, etc. Participants can choose independently.
   The main categories include pension target funds, commercial pension insurance, pension wealth management, and specific pension savings.
   The main differences among the four categories of products are as follows:
   

3. Interpretation of the "12,000 yuan pre-tax deduction" and "tax burden reduction" in the "Opinions on Promoting the Development of Personal Pensions":
   On September 26, 2022, the State Council's executive meeting decided to implement personal income tax incentives for policy-supported, commercially operated personal pensions. The meeting pointed out that developing policy-supported, commercially operated personal pensions is conducive to better meeting the needs of the public and improving the level of protection. The specific tax incentives are basically consistent with previous market expectations: contributors will receive a pre-tax deduction of up to 12,000 yuan per year, investment income will not be taxed temporarily, and the actual tax burden on income will be reduced from 7.5% to 3%. Among them, 7.5% corresponds to the applicable tax rate of 10% for previous personal tax-deferred commercial pension insurance, with an additional 25% exemption, while 3% corresponds to the applicable tax rate for annual taxable income below 36,000 yuan. This decision is a further implementation and clarification of the guiding opinions on the details of personal pensions following the issuance of the "Opinions on Promoting the Development of Personal Pensions" by the General Office of the State Council on April 21, 2022, the solicitation of opinions on the "Interim Regulations on the Management of Publicly Raised Securities Investment Funds for Personal Pensions" by the China Securities Regulatory Commission on June 24, 2022, and the release of the "Notice on Carrying Out Pilot Work for Specific Pension Savings" by the China Banking and Insurance Regulatory Commission and the People's Bank of China on July 29, 2022.

4. A pre-tax deduction of up to 12,000 yuan for contributors means that the expenses for purchasing personal pensions can be deducted from taxable income, similar to deductions for child education, continuing education, major illness medical expenses, elderly support, and mortgage interest. The personal pension contribution can also be deducted from personal income tax, with a limit of 12,000 yuan per year.
   

The tax-saving effect of the personal pension tax exemption policy varies for different income groups.
2. The interpretation of "tax burden reduction": The pre-tax deduction of 12,000 yuan per year, temporarily not taxing investment income, and the actual tax burden on income being reduced from 7.5% to 3%. Among them, 7.5% corresponds to the applicable tax rate of 10% for previous personal tax-deferred commercial pension insurance, with an additional 25% exemption, while 3% corresponds to the applicable tax rate for annual taxable income below 36,000 yuan. These are tangible reductions in tax burdens compared to the situation before the policy was clarified (i.e., the personal pension tax rate of 3% is significantly lower than the previous 7.5% tax rate for tax-advantaged pension insurance).
3. Taking the example of regularly contributing for 35 years at a 7% compound investment return, under the 12,000 yuan deduction limit, taxpayers with monthly incomes ranging from 5,000 to 100,000 yuan can receive additional tax benefits, with the total tax savings amounting to between 24,000 and 80,000 yuan.

4. The significance of the release of the "Opinions on Promoting the Development of Personal Pensions":

5. It can help residents establish a long-term stable investment concept and create independent pension financial and psychological accounts, which helps improve the adequacy and sense of security of residents' pension protection.

6. It promotes the development of personal pensions.
   Some securities firms estimate, based on data from the National Bureau of Statistics and related sources, that there are approximately 25 million people in the country with monthly incomes exceeding 10,000 yuan. Assuming an average annualized return of around 4.0% for pension accounts, under neutral conditions, if 50% of the population with monthly incomes over 10,000 yuan contributes 12,000 yuan (with subsequent coverage increasing by 1% annually), it is estimated that the annual increment of personal pension accounts will be around 150 billion yuan. After 5 or 10 years, the cumulative funds of personal pensions could reach 100.54 billion yuan and 306.16 billion yuan, respectively. (In comparison, as of August 2022, the total scale of investable financial products for personal pensions in China was approximately 190 billion yuan. The increase is 5 to 15 times.)

7. What are pension target funds?
   Pension target funds refer to an innovative type of public fund that aims for the long-term stable appreciation of pension assets, encourages investors to hold for the long term, adopts mature asset allocation strategies, and reasonably controls the volatility risk of investment portfolios.
   According to the guidelines from the China Securities Regulatory Commission, pension target funds should operate in the form of fund-of-funds (FOF) or other forms recognized by the CSRC. The investment strategies mainly include target date and target risk strategies. Pension target funds should have a closed period or a minimum holding period for investors of no less than 1 year. The closed period should not be less than 1 year, 3 years, or 5 years, with the total proportion of investments in stocks, equity funds, mixed funds, and commodity funds not exceeding 30%, 60%, or 80%, respectively. Pension target funds have been defined as long-term investment tools with controllable downside risks.
   They can also be divided into target date funds and target risk funds.
   Target date funds, also known as life cycle funds, are constructed based on the retirement date set in the product, following a pre-agreed dynamic asset allocation plan that changes over time. The fund continuously rebalances the portfolio to gradually reduce the emphasis on asset growth and increase the focus on returns. This product aims to provide a one-stop pension solution for the entire cycle and can serve as the core of an investor's portfolio. Investors can invest their assets in target date funds that match their target retirement dates for a long time before retirement, withdrawing the principal and returns in a lump sum or in installments upon retirement.
   Target risk funds, also known as lifestyle funds, are based on the risk level set in the product, maintaining the risk at a pre-set level through static asset allocation. Based on the set risk, such as "conservative," "balanced," or "aggressive," they aim to maximize returns by optimizing calculations to derive the optimal allocation ratio for the portfolio. Funds with lower risk levels have higher allocations to cash and fixed-income assets and lower allocations to stocks. Unlike target date funds, investors in target risk funds control the risk level themselves and do not rely on fund managers, so they need to adjust actively based on their own situations. Compared to target date funds, which can have holding periods of several decades, target risk funds generally have shorter holding periods of a few years.

8. The significance of policies such as the "Opinions on Promoting the Development of Personal Pensions" for pension target funds:
   Among various personal pension investment products, public funds have advantages in managing equity assets. In the medium to long term, as China's capital market matures, public funds are expected to benefit from the increase in the proportion of equity asset allocations, using pension target funds as a means to capture a larger share.
   Policies such as the "Opinions on Promoting the Development of Personal Pensions" will bring stable incremental funds to the public fund industry, benefiting leading institutions with excellent long-term investment capabilities and promoting the long-term development of pension target funds.

9. How to choose pension target funds:

10. Choose those that meet policy requirements. According to the "Interim Regulations on the Management of Publicly Raised Securities Investment Funds for Personal Pensions," the fund products (hereinafter referred to as personal pension funds) that can be invested in personal pensions should have characteristics such as safe operation, mature stability, standardized targets, and a focus on long-term value preservation, and comply with laws and regulations and the provisions of the China Securities Regulatory Commission, including: (1) pension target funds with a scale of no less than 50 million yuan at the end of the last four quarters; (2) stock funds, mixed funds, bond funds, fund-of-funds, and other funds that are stable in investment style, clear in investment strategy, have good long-term performance, and are compliant and stable, suitable for long-term investment in personal pensions.
    Currently, there are 178 pension target funds (target date FOFs + target risk FOFs with "pension" in their names, only counting initial funds), and the latest total scale has exceeded 100 billion yuan, with 79 target date FOFs and 99 target risk FOFs. Among them, 86 funds meet the criteria, including 39 target date FOFs and 47 target risk FOFs. As of now, the median annualized return of eligible pension funds since their establishment is approximately 5.8%.

11. Long-term performance should be outstanding.
    Here are some pension target funds with good performance:

In the past three years, three funds have had Sharpe ratios higher than the active stock fund index, and in the past two years, the maximum drawdown has all been lower than that of active stock funds. In the past three years, all performances have been positive, significantly outperforming the CSI 300 index, but lower than active stock funds, mainly because they hold a considerable proportion of bond funds, which reduces drawdown but also lowers returns. Among them, 007188 and 006307 have performances close to active stock funds, with Sharpe ratios and maximum drawdowns in the past three years and two years outperforming active stock funds.
3. Investment style should be stable, investment strategy clear, long-term performance good, and operation compliant and stable.
4. The managing institution should have strong active investment capabilities. You can refer to the rankings of active investment capabilities from fund research institutions over the past 10 or 20 years.

8. Conditions needed for the development of personal pensions (compared to the U.S.):
   
   The development of personal pensions requires broad, high tax incentives, flexible account conversions, default investment selection mechanisms, a rich variety of investment options, and good investment returns. These are more policy encouragements, and it is hoped that further promotion can be achieved in the future.

6 Is it Necessary for Ordinary People to Participate in Personal Pensions?#

In April of this year, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pensions." On November 4, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly issued the "Implementation Measures for Personal Pensions." Personal pensions are steadily advancing, and I believe that many friends will soon face the question of whether to buy personal pensions or not.
In my view, personal pensions have three key words, which are my answers.
Keyword 1: Reform dividends.
Before the introduction of personal pensions, most workers were familiar with and paid the national basic pension insurance, which is enforced by the state, with units and individuals contributing 20% and 8% of the total salary, respectively, deposited into the social pooling account and personal account. Upon retirement, the monthly pension is calculated based on the average life expectancy of the urban population, the individual's retirement age, interest rates, and other factors. Therefore, this pension is currently uncertain, and how much you can receive in the future is not guaranteed; relatively speaking, the more you contribute and the longer you contribute, the more you will receive, but the exact amount is uncertain.
In this context, I think of two points:

1. What everyone can receive is only the basic security provided by society, which cannot meet your additional needs.
2. In the early 1990s, during the initial reform of basic pension insurance, some people participated in a timely manner, and at that time, there was a one-time payment for many years. In recent years, as they retire, pensions have been gradually increased, enjoying a wave of dividends. Those who contributed back then all say it was good.
   From this perspective, the current push for personal pensions is also a significant reform of the national pension system, serving as a supplement to basic pension insurance. Early participation may allow for better enjoyment of reform dividends.
   Keyword 2: Tax incentives.
   Compared to reform dividends, the following may be more realistic for individuals. How much benefit do ordinary people get from buying personal pensions?
   First, it is clear that the money you contribute now is all yours, and under certain conditions, it can be withdrawn (for going abroad or settling abroad) and can also be inherited; this money belongs solely to you. Secondly, this money is used for investment, allowing you to choose to purchase regulated savings deposits, wealth management products, commercial pension insurance, public funds, and other financial products, with varying levels of risk and returns depending on your personal choices. Compared to investing in corresponding varieties on your own, personal pensions have the following tax benefits:
   The biggest benefit: it can deduct individual income tax. Similar to deductions for child education, continuing education, major illness medical expenses, elderly support, and mortgage interest, personal pensions can also deduct individual income tax, with a limit of no more than 12,000 yuan for the deductible portion before personal income tax. For most people, annual income is generally between 100,000 and 300,000 yuan, with a minimum tax rate of 3%, which can save about 360 yuan in taxes, and at a 10% tax rate, it can save about 1,200 yuan in taxes... Of course, the higher the salary, the more advantageous the deduction. The reason for the limit of 12,000 yuan per year is also to avoid high-income individuals paying more, further widening the gap between the rich and the poor. In other words, personal pensions are a must-buy product for high-income groups.
   Limited-time incentives: Investment income is temporarily not subject to individual income tax. Generally, the tax rate on personal investment income is 20%. Even at the current social security fund's annual return of 8%, individual income tax would still need to be paid at 192 yuan each year. This is a limited-time incentive; the earlier you participate, the earlier you enjoy it.
   In terms of tax benefits, most people can expect to save between 550 and 1,400 yuan, equivalent to a national concession of 5%-11%. The higher the income, the more advantageous it is.
   Keyword 3: Individual choice.
   The biggest difference between personal pensions and basic pension insurance is the emphasis on individual choice.
   It is not mandatory; you can choose to buy or not.
   There are no restrictions on the amount and frequency of contributions. Not exceeding 12,000 yuan, it is more about protecting ordinary people. You can choose a suitable contribution amount based on your personal income. It also avoids the pressure of a one-time payment of 12,000 yuan, allowing for a monthly expenditure of 1,000 yuan, which enforces savings.
   There are no restrictions on investment varieties. Currently, there are many diverse investment options, of course, with varying levels of risk. For those seeking stability, savings deposits or commercial pension insurance are suitable; for those seeking returns, public funds may be worth considering, especially with the stock market at 3,000 points, is it waiting for a wave of public funds?
   This diversity of choice reflects fairness. Absolute fairness does not exist, but individual choice allows for relatively fair benefits for the majority.
   For ordinary people, contributing 12,000 yuan a year, or 1,000 yuan a month, is not a loss and is not a scam; the state backs it, making it safe and reliable; the returns are stable, at least higher than most standards. Therefore, I have decided to apply for the maximum amount every year.

7 Ten Questions and Answers about Personal Pensions#

The "Implementation Measures for Personal Pensions" were jointly issued by four departments: the Ministry of Human Resources and Social Security, the Ministry of Finance, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission.
Previously, some documents and opinions regarding personal pensions were also issued. This implementation measure mainly specifies the participation process, fund account management, institution and product management, information disclosure, and supervision.

1. What are personal pensions?
   We refer to the three pillars of the pension security system: basic pension insurance, enterprise annuities, and personal pension systems. Basic pension insurance is what we commonly refer to as "social security," which is government-led and managed, and has a mandatory nature. Currently, this pillar occupies an absolute proportion. Enterprise annuities are voluntarily established by enterprises based on their economic strength and conditions. The coverage of this pillar mainly depends on the enterprises and is not mandatory. Finally, personal pensions are voluntarily participated in by individuals, as this money is all theirs. Currently, social security occupies a large proportion, and annuities also have a share, but personal pensions are minimal. Since these are the three pillars, it is only natural to develop personal pensions as a pillar.

2. How to open a personal pension account?
   Personal pensions implement a personal account system, with contributions fully borne by individuals. This means that this money is all contributed by you, and the amount accumulated later is what you will have. Two accounts need to be opened: a personal pension account (opened on a unified information platform) and a personal pension fund account. The first account records your identity information and serves as proof for enjoying preferential policies in the future.
   The second account is your investment account. Participants can open accounts at designated accounts of commercial banks that meet regulations or through designated financial product sales institutions that comply with regulations.
   This account will be "sought after" by various qualified financial sales institutions, but objectively speaking, most people will still choose commercial banks as their first choice.

3. What are the tax incentives for deferred taxation on personal pensions?
   A maximum of 12,000 yuan can be contributed annually, and of course, this limit may be adjusted later. The investment income deposited into personal pension accounts will not be subject to individual income tax temporarily, but when withdrawn, a 3% personal income tax will be levied. If your personal income tax is 3%, there is actually no difference. If your personal income tax is 10% or 20%, then it will have an impact.

4. What is the investment range for personal pensions?
   Pensions involve many departments, such as taxation and security, as well as asset management departments, which determine which asset management institutions can manage personal pensions. Four types of products are mentioned: public funds, bank wealth management, commercial pension insurance, and savings deposits, with public funds regulated by the CSRC, while bank wealth management, deposits, and insurance are regulated by the CBIRC. The asset management institutions involved include public fund managers, banks and their wealth management subsidiaries, and insurance companies.

5. What are the advantages of the fee structure for personal pension investment products?
   Looking at the relevant regulations in public funds, "personal pension funds' separate share classes cannot charge sales service fees, and can waive subscription restrictions and subscription fees (except for legally required fees that must be charged and included in the fund's assets), and can implement certain rate discounts on management fees and custody fees."
   No sales service fees can be charged, and service fees can be waived; management fees and custody fees can be discounted.
   On the bank wealth management side, it is quite clear that no subscription/registration fees are charged.

6. Which funds can be included in personal pension products?
   (1) Pension target funds with a scale of no less than 50 million yuan at the end of the last four quarters or a scale of no less than 200 million yuan at the end of the previous quarter;
   (2) Stock funds, mixed funds, bond funds, fund-of-funds, and other funds that are stable in investment style, clear in investment strategy, compliant and stable in operation, and suitable for long-term investment in personal pensions.
   Pension target funds are the first choice, and other types of funds are also within the scope. This list is published by the CSRC every quarter. With such a strong background helping you select funds, this list is indeed quite intriguing.

7. Which sales institutions can sell these funds?
   A core requirement is that "the operating status is good, financial indicators are stable, and there is strong public fund sales capability; the total scale of stock funds and mixed funds held at the end of the last four quarters is no less than 20 billion yuan, with personal investors holding no less than 5 billion yuan."
   Based on this requirement, let's talk about which third-party sales institutions have "20 billion": Ant Group, TianTian, TengAn, JiYu, YingMi, HuiCheng, TongHuaShun, JD.com. Of course, there may also be institutions where personal investors hold less than 5 billion.

8. What are the ways to withdraw personal pensions?
   Once any of the following conditions are met, personal pensions can be withdrawn monthly, in installments, or in a lump sum:
   (1) Reaching the age for receiving basic pensions;
   (2) Completely losing the ability to work;
   (3) Going abroad (or settling abroad);
   (4) Other circumstances specified by the state.
   In the event of the participant's death, the assets in their personal pension fund account can be inherited.

9. What impact will long-term funds have on the stock market?
   According to a research report by CITIC Securities, it is estimated that there were over 70 million individual income taxpayers in China in 2021. Based on the maximum contribution limit of 12,000 yuan per year for personal pension accounts, if calculated at the maximum, it will bring an annual incremental fund of 840 billion yuan. If we assume an average investment ratio of 75%, it will also bring an annual incremental fund of 630 billion yuan.
   First, we need to look at the level of participation, and secondly, the design of personal pension products is generally focused on stable value preservation, such as deposits, cash, or bonds. The proportion of equity assets should be limited. Regarding the stock market, I personally believe the impact will be limited.

10. Will I buy personal pension products?
    First, think about a question: what will you rely on for retirement? Some say having money is enough, which means your security may just be cash; some believe in relying on children for old age, which means your security may be your children's education funds. Of course, entering old age also involves diseases, which can be avoided through insurance.
    So, personal pensions are essentially saving a sum of money for your future self. Moreover, the assets in this account can be inherited, potentially leaving a sum for future generations.
    From the perspective of asset allocation, security-type assets can be understood as cash, insurance, education funds, personal pension products, etc., which need to be allocated in a certain proportion. If you pursue faster asset growth, you still need to choose higher-risk products.

8 How to Plan for Retirement - A Beginner's Guide#

Here is a process for reference for all friends. The entire planning is divided into five parts:

1. Think about life planning.
   Combine overall life planning to determine the financial part. For example:
   (1) When do you plan to retire: at 65 or 45?
   (2) Cross-period allocation of cash flow.
   From the perspective of increasing income, plan human capital. Are you engaged in a job that seeks stability and becomes more valuable as you age, or a high-income job that relies on youth? The former has a longer cash flow duration, with lower short-term income and higher long-term income. The latter is the opposite. Here, work is broadly defined, including entrepreneurship.
   From the perspective of reducing expenses, plan consumption. Should you prioritize current consumption to improve quality of life, or be moderately frugal to increase savings and wealth accumulation speed?
   (3) Special arrangements. For example, how much to leave for family members, etc.
2. Clarify financial goals.
   In this step, we need to convert life planning into feasible financial goals.
   (1) First, based on career planning and consumption levels, roughly estimate future possible income and expenditure cash flows. Obviously, predictions cannot be precise, but subsequent steps can design "unexpected reserves" to compensate.
   For example:
   Mr. A, a native of a first-tier city, starts working at 25 and plans to retire at 45. During his working years, after deducting consumption, he saves 70,000 yuan annually. In the first year of retirement, he plans to spend 100,000 yuan annually (current consumption level of 80,000 yuan + unexpected reserve of 20,000 yuan), leaving no inheritance. To simplify calculations, all data is adjusted for CPI.
   Based on expected lifespan, estimate the survival time after retirement. To avoid the awkward situation of "running out of money while alive," estimate the average life expectancy for men at 80 years and for women at 85 years.
   (2) Calculate the target return rate. This step can be completed using Excel software or a financial calculator.
   Using the previous example, input the cash flows into Excel. Each number 7 represents 1 year's cash flow, totaling 20 rows (20 years of work, each year saving 70,000). Below are 35 rows of -10 (retiring at 45, living until 80, totaling 35 years, with annual expenditures of 100,000).

Find a blank cell, such as B1, and input the formula:
=IRR(A1)
A1 to A55 corresponds to the area of the 55 cash flow data just entered. Press Enter, and the result will display: 4% or 3.54%.
This result means that to achieve the financial goal, the annual investment return rate must reach 3.54% after deducting inflation.
Next, estimate the actual return rate needed to achieve the target, adding CPI (Consumer Price Index). CPI can be estimated at 4-5%. Conclusion: The future return rate must reach 8-8.5% for this retirement plan to be feasible.
(3) Determine the acceptable risk level.
Currently, in a bear market, many friends are "nervous," indicating that the risk level of their investment portfolios exceeds their capacity, which may lead to anxiety and even panic selling at the bottom.
Everyone has different risk tolerance levels. If you can recall your severe anxiety and random selling during previous bull and bear cycles, you can roughly remember the extent of the portfolio's drawdown. For example, I can tolerate a drawdown of about 15%.
Newcomers often overestimate their risk tolerance. In principle, newcomers should aim for a drawdown of less than 10%. As investment experience increases, risk targets can be reset based on individual circumstances.
(4) Investment duration and liquidity. Clarify how long funds can be locked in for investment. Generally, retirement savings have lower liquidity needs, and urgent needs should be addressed through insurance, reserve funds, etc.

3. Determine asset allocation.
   Transform the target returns, risk, duration, and liquidity constraints determined in the previous step into an asset allocation plan, determining the proportion of each asset class to invest. Here is a quick reference for newcomers.
   Using historical data since October 2016, choose the Jiashi Research Alpha (close to the equity fund index) as the representative stock fund and the Yifangda China Bond New Comprehensive Index as the representative bond fund. Assuming only investing in stock and bond funds with a holding period of 1 year, calculate the average returns and maximum drawdowns for different stock fund holding ratios as follows:

Based on the previous example, Mr. A's target return rate is 8%, and his risk tolerance is a "maximum drawdown of 15%."
Using the above chart, a 40% stock fund allocation corresponds to an 8.1% return rate and a -10.9% maximum drawdown. A 50% stock fund allocation corresponds to a 9.0% return rate and a -14% maximum drawdown. A stock fund allocation of 40%-50% is reasonable.
If the return target and risk target contradict each other, for example, if someone aims for a return of 20% but can only tolerate a drawdown of 10%, it is challenging to achieve this with public funds. In that case, it is necessary to revisit the previous step, adjust the personal financial plan, and lower the target return rate to a reasonable range.
Additionally, investment duration and liquidity needs also affect asset allocation. Stocks should only be considered for investment if there are idle funds for more than three years, and bonds should only be considered if there are idle funds for more than one year.
The long-term stock-bond allocation ratio determined above is the "strategic asset allocation." Advanced investors can also make tactical asset allocation adjustments based on strategy research, stock-bond cost-effectiveness, valuation indicators, etc., to potentially achieve excess returns or reduce risks. For example, during the 3,000-point level of the Shanghai Composite Index, one can overweight stock funds. Additionally, asset allocation can include international stocks (QDII), gold, and other assets to further improve the risk-return ratio.
4. Build an investment portfolio.
Currently, the national tax incentive policy for pensions includes financial products such as bank wealth management, savings deposits, commercial pension insurance, and public funds. Taking funds as an example, there are mainly two approaches:
(1) Select excellent funds. A relatively friendly approach for newcomers is to refer to authoritative lists, such as Morningstar award-winning funds. Based on friends' backtesting, buying Morningstar award funds may yield better-than-average returns in the future. The following is a list of Morningstar award-nominated funds for 2022.
Additionally, TianTian Fund ratings can also serve as a reference.
For experienced players, they can explore promising fund managers based on reports, holdings, etc.; or use quantitative models to screen funds; or conduct rotations based on macro and strategy research. Pursuing excess returns is a highly professional matter, and it is not recommended for most retail investors to participate. Handing it over to FOFs or investment advisors is also a viable option.
(2) The "spread the risk" strategy, which involves buying a large number of active funds at low allocations to pursue the average returns of active funds; or buying broad-based index funds to pursue market average returns. Buying a single fund that is well-diversified and highly correlated with the equity fund index, such as Jiashi Research Alpha, Xingquan Preferred Progress FOF, can also be classified under this strategy. The spread the risk strategy does not participate in speculation, enjoying average returns while eliminating the risk of underperforming the average, which is a great wisdom.
Regardless of the approach, purchases should be made in accordance with the proportions determined in the asset allocation.
Returning to the previous example, allocate 40-50% to stock funds and 50-60% to bond funds. Considering that the current stock market is at a low point, stock funds can be allocated at the upper limit of 50%.
If using the "spread the risk" strategy, one can buy 50% Jiashi Research Alpha stock fund (F000082) and 50% Yifangda China Bond New Comprehensive Bond Index A (F161119). The former is highly correlated with the equity fund index, replacing a basket of stock funds, while the latter is a broad-based bond index fund.
5. Conduct post-investment management.
After building the retirement fund portfolio, there is no need to focus too much on short-term fluctuations. The main tasks are as follows:

1. Regularly assess whether there are changes in your life planning and financial goals. For example, if your salary significantly increases, you can try to increase contributions to shorten the time to achieve your retirement accumulation goals. If your investment experience improves and your risk tolerance increases, you can moderately raise the risk level of your investment portfolio. After adjusting financial goals, asset allocation and investment portfolios should also be adjusted accordingly.
   This step requires caution to avoid frequently adjusting financial goals based on short-term market fluctuations. It is a taboo to raise risk tolerance in a bull market and lower it in a bear market; be very careful.
2. Rebalance the investment portfolio. With market fluctuations, the proportion of each fund will change. If there is new capital, try to restore the fund proportions to their original levels. For example, the recent bear market will lead to a significant decrease in the proportion of stock funds, and new funds should primarily be used to purchase stock funds to restore the original proportions of the portfolio.
   If funds are selected based on Morningstar awards, TianTian ratings, or multi-factor quantitative models, they should be adjusted according to the pre-planned schedule, generally annually. Absolutely avoid frequent operations based on short-term performance; short-term high returns are often a reverse indicator of future returns.
3. Monitor portfolio risks and performance. If the portfolio performs poorly over the long term (e.g., 2 years) or the maximum drawdown exceeds expectations, causing significant psychological pressure, it is necessary to reconsider whether the financial goals, asset allocation, and investment strategies are reasonable and revise the investment plan.
   The above five steps are some insights from me. Everyone is welcome to discuss together.

Risk Warning: The individual stocks mentioned in this article are for reference only and do not constitute investment advice. The risk of buying based on this is borne by the buyer. More quality content can be found.

When assessing intergenerational support pressure, the dependency ratio indicator is very important, based on the analysis of the age structure of the population, determining how many young people support each elderly person.

Specifically, the elderly dependency ratio (support ratio) = elderly population / working-age population.

How does a post-90s girl living in a first-tier city plan her four types of money? Managing different types of funds separately is like tagging this money with exclusive labels, allowing us to have more accurate expectations for this investment.

Managing different types of funds