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CNBC AI News, August 11 – A recent statement by Yan Zhipeng, a professor at the Shanghai Advanced Institute of Finance (SAIF) at Shanghai Jiao Tong University, suggesting that saving for retirement is most advantageous when starting at age 10, sparked widespread discussion and critique. Professor Yan has now responded to the controversy.
Professor Yan clarified that his research paper, “New Financial Horizons: A Perspective on Retirement Finance,” had been quoted out of context, leading to misinterpretations of his “start saving at 10” example.
He reiterated his intention to provide further analysis and context to better illustrate his points.
In the original paper, Yan emphasized the critical need for regulators and financial institutions to address the specific retirement challenges faced by women. “With women retiring about five years earlier than men yet living five to eight years longer, and considering the common age difference in marriages, many women will spend over a decade of their later years alone,” he stated.
Yan advocates for institutional support for women, arguing that the current annual contribution limit of 12,000 yuan for individual pension plans is insufficient for women who retire earlier and have a shorter accumulation period. He proposes raising the limit to 18,000 or 24,000 yuan to compensate for the shorter timeframe. Yan also suggests that financial institutions should develop retirement plans specifically tailored to women’s needs.
Furthermore, Yan highlighted the importance of the “time leverage” in retirement planning, using a hypothetical scenario involving triplets. Assuming an annual return rate of 8%, if one triplet saves 10,000 yuan annually for six years starting at age 10, their account would reach 3.44 million yuan by age 65. Another triplet saving 10,000 yuan annually for nine years starting at age 16 would accumulate 2.93 million yuan. The last triplet saving 10,000 yuan annually for 40 years starting at age 25 would only reach 2.80 million yuan. “The earlier you start, the more significant the compounding effect. Individuals in their 20s should invest a larger proportion of their portfolios in equities to leverage the power of compounding,” Yan advised.
He also suggests that those in their 30s need to balance immediate expenses with retirement savings by implementing a “30 yuan rule”: Save 30 yuan each day before spending, totaling 10,000 yuan per year. With a 30-year compounding period at 8%, the accumulated wealth could reach 1.372 million yuan.
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