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1 How can ordinary people effectively plan for retirement investment?#

Before discussing the main content, I would like to talk about why we need to 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.

Firstly, 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 portion of pension funds dedicated to medical security.

Secondly, basic living security is essential, and we all hope that as we age, our quality of life does not decline. Especially for our generation, we have all experienced a somewhat carefree urban lifestyle in our youth. If we have to start living on basic necessities after retirement, I believe many people would find it unbearable.

Ultimately, planning for retirement should achieve two goals:

1. Ensure that we can afford medical care when we are old.
2. Maintain our quality of life.

Since retirement planning is so important, what should we do? Here are 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 still in a situation where the first pillar is dominant (state-mandated, with enthusiastic participation from the public), the second pillar is weak (neither employers nor employees are interested), and the third pillar is underdeveloped (the public is not buying in).

Especially for ordinary people born between the 1980s and 2000s, when they retire, they will face severe population aging, with more people sharing the "cake," while the number of young people supporting them will decrease, leading to immense pressure on pension distributions.

I believe these generations should prepare 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 and instead save your own money, 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 rate of return cannot keep up with the growth of the average wage in society. You may think that earning a few thousand more a month is a lot now, but who knows how much that will be worth in twenty years?

Although future pensions face significant pressure, basic pension insurance remains a relatively good system. It may not guarantee that you will eat well in your old age, but it will ensure that you have food to eat, which is sufficient for most people.

Second, invest conservatively 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 depreciates step by step. Low interest rates on demand deposits and inconvenience in withdrawing fixed deposits are inherent flaws of bank savings, which are gradually being phased out by the times.
2. Buying various insurances. It's not that you can't buy them, but there should only be one reason to buy these products—because you need them. Unfortunately, most people are misled by friends, classmates, and relatives.
3. Treating wealth 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. Pension funds should primarily focus on stability but must outperform inflation. For investors, many will 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 generate profits.

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 promote it, it is advisable to purchase cautiously.

The order of purchasing commercial insurance should be: the pillar of the family (the highest or most stable income earner) >> the secondary pillar of the family >> the children in the family. Generally, there is always one adult in the family who has the highest or most stable income, and their income supports the entire family's expenses. If this person is healthy and has a stable income, the family's economic income is guaranteed. If this person faces a crisis, it is like the foundation collapsing, which is a devastating blow to the family.

There are often news stories about crowdfunding and mutual assistance, and there are countless examples of families being destroyed. In fact, many families' insurance purchasing order is exactly the opposite; the adults in the family do not purchase insurance first but buy education insurance and accident insurance for the children. Even if the child really has an accident, the biggest impact is emotional; financial compensation is of little use. But what if the adult has an accident?

Additionally, some people ask why insurance is not purchased for the elderly. Because it is not cost-effective. In fact, for those over 60, either there are very few insurance products available, or the premiums are much higher than for younger people. When your premiums and benefits are not significantly different, the meaning of purchasing insurance is really not great; it is easier to save.

Fourth, prepare for the unexpected. Although it is never too late to mend the fence after the sheep are gone, preventing problems before they occur is a higher realm. To have a rich and colorful old age, one must do the following four things in advance while young:

1. Eat scientifically. This goes without saying; everyone is increasingly demanding healthier diets.
2. Exercise regularly. It is said that retirement is expensive; for ordinary people, it is better to exercise well; otherwise, they may not even be able to collect their pensions.
3. Get 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.
4. Balance work and rest. This principle is well understood, but it should be reminded that leisure does not equal indulgence or unrestrained entertainment.

Effective entertainment is based 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 has strong capabilities, many people can even retire early or prioritize wealth management to ensure a comfortable retirement life. However, no matter what, one must prepare for retirement investment planning in advance, and it should primarily focus on stability.

2 What can I do to enhance my pension?#

I believe that people have a life expectancy, 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 as they age and retire.

Whenever 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? While I am still young, how should I plan my investments so that when I retire one day, I might have some form of security? Perhaps my retirement planning is aimed at pursuing a better investment life.

While I am still young, I prefer a diversified asset allocation strategy in my investment approach. 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 would like to discuss the current state of retirement in our country and my understanding and perception of pension target funds.

I. What is the current state of retirement in our country?
From the government's attitude towards retirement issues, the main focus is on family-based retirement, 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 retirement in our country mainly consists of three basic pension methods: social pension, family pension, and self-savings pension.

1. Social pension: 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 broad coverage, low protection, ineffective cost control, low operational efficiency, and unfair protection systems, resulting in some people being left without basic security.
2. Family pension: This is currently the most common form of retirement and reflects the traditional virtues of the nation. Under the existing economic conditions and traditional cultural models, family pensions remain the mainstream retirement method in our country. Relevant data shows that among the total economic sources of the elderly, 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 children's support holds a certain position among urban elderly, while in rural areas, it occupies an important or even primary position.
3. Self-savings pension: Relying on regular savings for retirement, there is still a certain market for this 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 by controlling their own finances can they be most reliable. Therefore, they try to save and economize as much as possible for old age. However, low interest rates, high inflation, astronomical medical expenses, and future high living costs make saving for retirement increasingly difficult.

II. Why plan for retirement?
It is important to understand that people will inevitably grow old; this 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 them with material and spiritual support? This is the issue of retirement.

Problems with retirement include: shrinking family sizes, weakened family functions; accelerated population mobility, and severe intergenerational tilt; extended life expectancy for the elderly, decreased self-care ability, and the reality of impacting traditional lifestyles.

With the gradual establishment of a market economy and the modernization of social economy, as well as population mobility, traditional family pensions are facing many challenges. For example, in 1995, the average family size in the country 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 shifted to core families, with complete core families consisting of parents and unmarried children accounting for 57.81%. The shrinking average family size and the increasing number of complete core families have led to a continuous increase in pure elderly households.

In modern society, population mobility is becoming faster and faster. 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 pay more attention to their children's education and growth issues, with limited time, energy, and financial resources skewed towards their children, resulting in a "heavy focus on the young and light on the old" phenomenon, 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. With the continuous improvement of social living standards, the life expectancy of the elderly is also increasing. However, as age increases (especially after 75), the health status of the elderly deteriorates, morbidity and disability rates rise, and self-care abilities decline. All of this will increase the burden on families and lead to a rise in the negative emotions of young people towards 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 of people over 60 in China will account for 31% of the total population, 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?

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

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

• The second is the personal account pension, with a standard of 1/120 of the cumulative savings in the personal account paid monthly. In addition, the state will provide transitional pensions as compensation for "middle-aged" retirees, but the formulation and distribution 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 wage of employees in the previous year in the city × 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 wage 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's monthly pension after retirement will be = 3000 yuan × 15% + 3000 yuan × 8% × 12 × 10 ÷ 120 = 690 yuan.
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 be reduced.

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 broad 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 effective supplementation. The third pillar is personal commercial pension accounts, which can provide additional supplementation to pensions outside 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 with a relatively small scale.

In fact, with the acceleration of the aging process in our country, the first pillar has become increasingly difficult to meet people's pursuit of high-quality retirement life, especially since nearly 500 million people in our country 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 compounding effect.

According to data, the replacement rate of basic pensions in our country is less than 45% per month, and it has shown a downward trend year by year. Therefore, the demand for personal investment in retirement is very urgent, and it is also a current national policy encouraging the development of personal pensions.

The pension replacement rate is one of the basic indicators for measuring the difference in living security levels before and after retirement, referring to the ratio between the pension level received by workers at retirement and their wage income level before retirement. According to the World Bank, pensions must reach 70-80% of pre-retirement income for the well-being and quality of life of the elderly to remain stable.

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.

IV. 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 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 has formulated tax incentive policies 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 and commercially operated personal pensions: for contributors, a tax deduction of up to 12,000 yuan per year will be allowed before tax, and investment income will not be taxed temporarily, with the actual tax burden on income reduced from 7.5% to 3%.

From 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 aimed at pursuing the long-term stable appreciation of pension assets, encouraging investors to hold them for the long term, adopting mature asset allocation strategies, and reasonably controlling investment portfolio volatility risks.

Pension target funds have certain uniqueness, distinguishing them 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 names and reflect the fund's investment strategy, while other public funds cannot use the term "pension."

Therefore, for most novice investors, they can easily find relevant pension target funds directly through the fund name, which is also a distinction 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 stocks, bonds, and other assets through holding other securities investment funds. In contrast, general funds directly invest 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 of equity assets and increase the allocation 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 durations, with a minimum of no less than one year. In terms of investment duration, pension target funds also have their unique aspects. 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 should not be less than one year. The advantage of this restriction is that it helps guide investors to hold long-term, thereby increasing the probability of investment success and pursuing the long-term stable appreciation of pension assets.

V. What are the 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, having professionals manage them saves time and effort, eliminating the need to research the fund market and reducing unnecessary troubles, allowing investors to focus on their work. After all, pension fund investments are long-term, mainly managed by powerful 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 high flexibility. Compared to other commercial pension insurance or social insurance, pension target funds have 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. Other social insurance or social pensions generally do not allow 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 investments of national basic pensions, enterprise annuities, occupational annuities, and commercial pension funds generally do not provide clear insights into the products and their operations. Funds operate in a standardized manner in the market, with transparent investments, temporary or periodic reports, and timely updates on information disclosure. Investors can better understand the operational status of their funds when investing in pension target funds, making planning more reasonable in conjunction with personal pension needs.

VI. 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 a way for novice investors to have additional pensions. Regular investment generally refers to investing a fixed amount at fixed intervals in a fixed fund. This can be used as a specific retirement plan without affecting personal daily funds and other investments, thereby reducing risks.

If investors have already made investment plans in advance and have funds aimed at retirement but are not pension FOF funds, they can consider switching to regular investments in corresponding pension FOF funds according to 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 our country 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 parts of Chinese society.

Currently, times have changed, and retirement investment is 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.

According to data predictions, by 2030, personal pensions may welcome an incremental capital 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 10 to 35 billion yuan to pension target funds each year.

Therefore, it is still necessary to add an extra pension for oneself in the present. To ensure that one has support in old age and does not have to struggle for money, it is essential to plan in advance for the kind of retirement life one desires. Although plans may not always keep up with changes, retirement investment must keep pace with the times.

Risk Warning: The name "pension target" does not represent income guarantees or any form of income commitment. Pension target funds do not guarantee principal and may incur losses. 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#

I. The primary goal of investment should be retirement.
In the European and American markets, the main goal of investors buying funds is retirement. For example, the 401K and IRA accounts in the U.S. are all aimed at encouraging everyone to invest for retirement. Initially, it was the responsibility of enterprises to take care of retired employees, as enterprises had longer lifespans than individuals. As the lifespan of enterprises has become shorter, it has gradually shifted to individuals taking care of 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 the investment masters' "ten years tenfold" investment capability, they could profit a hundredfold in twenty years. The current 1 million yuan in their hands could turn into 100 million yuan in 20 years. Wang Jingbo's requirements are relatively low, "tenfold in twenty years" is enough. To achieve "tenfold in twenty years," I must achieve an annualized return of 12.7%. Let's aim for an annualized return of 15%, which is Wang Jingbo's investment goal. One million yuan at 40 years old could become 10 million yuan at 60, which should be enough for retirement!

I mainly buy funds in my account, and the goal of buying funds is also retirement, which makes for a better mindset.

II. 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 capital because everyone invests to make short-term profits. When they come in, it is like a flood, and when they leave, it is a rapid outflow.

Think about it: in the U.S., every month when salaries are paid, a portion of millions of people's salaries goes into 401K and IRA accounts, which then invest 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 a long-term slow bull market.

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 of China's social security funds have also entered the stock market, but that is only a small portion of the social security funds that have been saved.

Currently, the market is at the bottom, and most are likely at a loss. Now, when discussing retirement investment, it seems that most people feel that making money from funds is unlikely. But think about it: isn't the probability of making money in a bull market greater when buying funds? Wang Jingbo believes that there will definitely be more and more smart investors.

III. How to understand: the personal pension tax burden is reduced from 7.5% to 3%?
Recently, there has been a lot of buzz: "For policy-supported and commercially operated personal pensions, personal income tax incentives will be implemented: contributors will be allowed a tax deduction of up to 12,000 yuan per year before tax, 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 tax deduction of up to 12,000 yuan per year before tax. If investors purchase funds, insurance, or other pension products through personal pension accounts, they will be granted a certain tax exemption limit, capped at 12,000 yuan.

So how much tax can be saved?

For example, if Wang earns 100,000 yuan a year, the annual income tax rate is 10%. If I buy 12,000 yuan worth of funds through my personal pension account, I can deduct 12,000 * 10% from my income tax, which is about 1,200 yuan, equivalent to buying funds at a 10% discount.

For those earning over 1 million yuan a year, the applicable annual income tax rate is 45%. If they buy 12,000 yuan worth of funds, they can deduct 12,000 * 45% from their 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 mutual funds (including capital gains and dividends) is taxable. Currently, we do not pay taxes on money earned from stock trading or mutual funds. If stock dividends are held for less than a year, taxes must be paid; if held for more than a year, no taxes are due. Fund dividends are also not taxed.

The regulations in our country over the past few decades have been "temporarily not taxed." People think "temporarily" means it is temporary, but this "temporarily" has been in use for 20 to 30 years. The key implication of this term 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. Young people with high incomes correspond to high tax rates, while older individuals withdraw less and pay lower tax rates, which is also a form of tax incentive policy.

So, where does the statement "the actual tax burden on income is reduced from 7.5% to 3%" come from? 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 tax-exempt, but taxes were still due upon withdrawal. According to regulations, 25% of the amount is tax-exempt, while 75% is subject to a 10% personal income tax. Thus, 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% of the amount is tax-exempt, while 75% is subject to a 4% personal income tax, resulting in an actual tax burden of 3%.

IV. How should fund investors plan for retirement investment?
The current issue of population aging has become a focal point of discussion, and at the same time, the need for 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 annuities/occupational annuities." If there are also savings-type pension insurance or commercial pension insurance, the cash flow sources during retirement will be relatively rich. However, these all belong to the "extension of professional capabilities" during youth. When studying, one should aim for a good university, and after graduation, find a high-paying job; the corresponding pension insurance resources will be richer. This article mainly discusses retirement investment planning.

In my personal understanding, "retirement investment" has the following characteristics:

a. Risk preference weakens. This is very easy to understand; as people age, their risk preference naturally weakens, and they pay more attention to potential investment risks. Therefore, retirement investment planning cannot be entangled in stocks every day; the investment categories should lean towards bond-type assets and broad-based indices.

b. Research ability weakens. This is also easy to understand; after all, as people age, they have less energy, and may also need to help their children with their grandchildren. Memory may also decline, and they may not understand emerging sectors, making bond-type assets and broad-based indices more suitable, as they do not require too much research ability.

c. Volatility tolerance weakens. As people age, they naturally cannot tolerate net value fluctuations of 20% or more; it can be quite stressful. Bond-type assets have lower volatility, so one should choose pure bond funds. Choosing bond funds with a large number of convertible bonds can 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 the 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 need cash flow, so liquidity issues must also be considered. At the same time, the goal of retirement investment planning is absolute returns; having 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. Below, 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 need cash flow, so liquidity issues must also be considered. Flexible access money market funds have excellent liquidity, and funds can be withdrawn at any time when needed. Currently, most bank money market funds have an interest rate of about 2%. A 5% allocation to money market funds can contribute an annualized return of about 0.1%. Only one money market fund needs to be selected, with no special requirements, as long as it is flexible and convenient. Note that money market funds should not be allocated too much; on one hand, basic pensions can contribute some cash flow, and on the other hand, even if money market funds are insufficient for short-term needs, since we have allocated pure bond funds, the net value drawdown will be minimal. If a large amount of money is needed in a short time, part of the pure bond fund can be sold to make up the difference, which will not be "stuck" like stock funds. Moreover, the absolute returns from pure bond funds can be sold annually to supplement the savings in the money market fund.

II. 70% pure bond funds mainly contribute absolute returns:
The 70% allocation to pure bond funds is the main contributor to returns. Two to three pure bond funds can be selected for diversified allocation, ensuring that they are pure bond funds, as the underlying assets should not contain a large number of convertible bonds. The volatility of convertible bonds is not smaller than that of stocks. For example, the Fortune Credit Bond A (F000191) has a 5-year return of 28.11%, equivalent to an annualized return of 5.08%, and the key is that its net value curve is very stable, with very little drawdown.

Another example is the Bosera Credit Bond Pure Bond A (F050027), which has a 5-year return of 24.71%, equivalent to an annualized return 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 return of 4.5%-5%. If we average it to 4.8%, then the 70% pure bond fund can contribute an annualized return of 3.36%. The reason for allocating a large number of pure bond funds is to smooth out the net value fluctuations of the entire portfolio. Most importantly, pure bond funds can contribute absolute returns every year to supplement the money market fund savings, ensuring that cash flow is sufficient during retirement.

III. 25% enhanced CSI 300 index funds mainly contribute elastic returns:
With 5% of the money market fund supplementing liquidity and 70% of the pure bond fund contributing absolute returns to supplement the savings, the basic cash flow expenses during retirement are resolved. The remaining funds need to consider appreciation, but volatility cannot be too high, and there is no need to invest too much effort in research. At this time, enhanced broad-based index funds are a good choice. For example, two to three enhanced CSI 300 index funds can be selected for diversified allocation. Let's look at the situation of the market's enhanced CSI 300 index funds. For instance, the Invesco Great Wall Enhanced CSI 300 Index A (F000311) has been established for 8 years and has a return of 159.75%, equivalent to an annualized return of 11.2%.

Another example is the Huaxia Enhanced CSI 300 Index A (F001015), which has been established for 7 years and has a return of 73.08%, equivalent to an annualized return of 7.4%.

Currently, the CSI 300 index is overall at the historical valuation bottom, so the return rate is slightly lower. By diversifying into two to three excellent enhanced CSI 300 index funds, it is highly likely to achieve an annualized return of around 10%. The 25% allocation to enhanced CSI 300 index funds can contribute 2.5% annualized return. However, enhanced CSI 300 index funds cannot contribute absolute returns as steadily as pure bond funds, requiring patience for long-term holding, so 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 still a decent return. Importantly, after resolving liquidity and absolute returns, it can maintain a relatively good expected return while keeping the portfolio's volatility relatively low, requiring minimal effort for management and research, making it a suitable retirement investment planning scheme for fund investors.

5 A brief discussion on the new personal pension policy and target pension funds#

I. Current state 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, government departments, and public institutions, 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: As of the end of 2021, the accumulated balance of basic pension insurance funds reached 6.4 trillion yuan, a 10.2% increase compared to the same period last year. In terms of asset allocation, basic pension insurance funds focus on balancing safety and returns. From the asset structure, investments held until maturity and trading financial assets are the main investment directions of basic pension insurance funds, accounting for 91.5% in total 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: As of 2021, the total scale of the second pillar pension reached 4.5 trillion yuan, with enterprise annuities accounting for 2.64 trillion yuan and occupational annuities accounting for 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.

II. 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, including bank wealth management, savings deposits, commercial pension insurance, public funds, etc. The main categories include pension target funds, commercial pension insurance, pension wealth management, and specific pension savings.

The main differences among these four categories of products are:

III. Interpretation of the "12,000 yuan tax deduction" and "reduced tax burden" 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 and commercially operated personal pensions. The meeting pointed out that developing policy-supported and 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 be allowed a tax deduction of up to 12,000 yuan per year before tax, 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 previous applicable tax rate of 10% for personal tax-deferred commercial pension insurance, with an additional 25% reduction, 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 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 issuance of the "Notice on Carrying Out Pilot Work for Specific Pension Savings" by the Banking and Insurance Regulatory Commission and the People's Bank of China on July 29, 2022.

1. A tax deduction of up to 12,000 yuan per year before tax means that expenditures for personal pensions can be deducted from taxable income, similar to deductions for children's education, continuing education, major medical expenses, supporting elderly parents, and mortgage interest.

2. The interpretation of "reduced tax burden": The annual tax deduction limit of 12,000 yuan before tax, temporarily not taxing investment income, and the actual tax burden on income reduced from 7.5% to 3%. Among them, 7.5% corresponds to the previous applicable tax rate of 10% for personal tax-deferred commercial pension insurance, with an additional 25% reduction, 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.

3. Taking an example of regular contributions over 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 cumulative tax savings ranging from 24,000 to 80,000 yuan.

IV. What is a pension target fund?
A pension target fund is an innovative type of public fund aimed at pursuing the long-term stable appreciation of pension assets, encouraging investors to hold them for the long term, adopting mature asset allocation strategies, and reasonably controlling investment portfolio volatility risks. 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 China Securities Regulatory Commission. Investment strategies mainly include target date and target risk strategies. The closed period for pension target funds or the minimum holding period for investors should not be less than one year. Funds with a closed period of no less than one year, three years, or five years can invest in stocks, equity funds, mixed funds, and commodity funds, with the total proportion not exceeding 30%, 60%, or 80%, respectively. Pension target funds have been defined as long-term investment tools with controllable downside risks.

They can be further divided into target date funds and target risk funds. Target date funds, also known as lifecycle 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 reduce the emphasis on asset growth while gradually increasing the focus on returns. This product aims to provide a one-stop retirement solution for the entire cycle and can serve as the core of an investor's portfolio. Investors can invest in target date funds that match their target retirement dates in a manner similar to regular investment until retirement, at which point they can withdraw their principal and returns in a lump sum or in installments.

Target risk funds, also known as lifestyle funds, are based on a set risk level in the product, maintaining the risk at a predetermined level through static asset allocation. Based on the set risk, such as "conservative," "balanced," or "aggressive," returns are maximized by optimizing calculations to derive the optimal allocation ratio for the portfolio. Funds with lower risk levels have a higher allocation of cash and fixed-income assets and a lower allocation of 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 make proactive adjustments based on their own situations. Compared to target risk funds, which can have holding periods of several decades, target risk funds generally have shorter holding periods.

V. The significance of policies such as the "Opinions on Promoting the Development of Personal Pensions" for pension target funds:
Among the various personal pension investment products, public funds have advantages in managing equity assets. In the medium to long term, with the maturation of China's capital market, 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.

The "Opinions on Promoting the Development of Personal Pensions" and other policies will bring stable incremental funds to the public fund industry, benefiting long-term investment capabilities of excellent leading institutions in the product sector and promoting the long-term development of pension target funds.

VI. How to choose pension target funds:

1. 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 that can be invested in personal pensions (hereinafter referred to as personal pension funds) should have characteristics of safe operation, maturity, stability, standardized targets, and a focus on long-term preservation of value, 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 suitable for long-term investment in personal pensions, with stable investment styles, clear investment strategies, good long-term performance, and compliant and stable operations.

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 conditions, 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%.

2. Long-term performance should be outstanding. Below are several 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 been lower than that of active stock funds. All three-year performances have been positive, significantly outperforming the CSI 300 index, but lower than active stock funds, mainly due to holding a considerable proportion of bond funds, which reduced drawdowns and returns. Among them, 007188 and 006307 have performances close to active stock funds, with Sharpe ratios and maximum drawdowns in the past three years outperforming active stock funds.

3. Investment styles should be stable, investment strategies clear, long-term performance good, and operations 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 to 20 years.

VII. Conditions needed for the development of personal pensions (compared to the U.S.):

The development of personal pensions requires broad, high-value tax incentives, flexible account conversions, default investment selection mechanisms, a rich selection of investment targets, and good investment returns. These policies encourage further advancement.

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 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.

In my view, personal pensions have three key words, which are my answers.
Key word one: 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 expected lifespan 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; it is relatively said that the more you contribute and the longer you contribute, the more you will receive, but how much more is uncertain.

In this context, I think of two points:

1. What everyone can receive is only the basic guarantee 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 the following years, as pensions were gradually increased, those who had contributed during that time enjoyed a wave of dividends.

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.

Key word two: Tax benefits.
Compared to reform dividends, the following may be more realistic for individuals. How much benefit does an ordinary person get from buying personal pensions?

First, it is clear that the money you pay now is all yours, and under certain conditions, it can be withdrawn (for going abroad or settling abroad), and it can also be inherited; this money belongs solely to you. Secondly, this money is used for investment, and you can choose to purchase various financial products that meet the regulations, such as savings deposits, wealth management products, commercial pension insurance, public funds, etc. The risk varies, and the returns depend 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 children's education, continuing education, major medical expenses, supporting elderly parents, and mortgage interest, personal pensions can also deduct individual income tax. The portion not exceeding the contribution limit of 12,000 yuan can be deducted before personal income tax. For most people, annual income is roughly between 100,000 and 300,000 yuan. At the lowest 3% tax rate, this can save about 360 yuan in tax, and at a 10% tax rate, it can save about 1,200 yuan in tax... Of course, the higher the salary, the more advantageous the deduction becomes. The reason for capping it at 12,000 yuan per year is also to avoid high-income individuals paying more, further widening the wealth gap. In other words, for high-income groups, personal pensions are a must-buy product.

Limited-time benefits: 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 8% return, individual income tax would still need to be paid on 192 yuan each year. This is a limited-time benefit; the earlier you participate, the sooner you enjoy it.

In terms of tax benefits, most people can expect savings of about 550-1,400 yuan, equivalent to a state subsidy of 5%-11%. The higher the income, the more advantageous it becomes.

Key word three: Individual choice.
The biggest difference between personal pensions and basic pension insurance is that it emphasizes 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 making 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. There are many diverse investment options available now, of course, with different risks. For those seeking stability, savings deposits or commercial pension insurance are good options, while those seeking returns might consider public funds. Is the current stock market at 3,000 points waiting for a wave of public funds?

This diversity of choice reflects fairness. Absolute fairness does not exist, but individual choice allows relative fairness to benefit the majority.

For ordinary people, contributing 12,000 yuan a year, or 1,000 yuan a month, is not a loss or 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 each 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 Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission.

Previously, some documents and opinions regarding personal pensions were also issued. This time, the implementation measures mainly specify the participation process, fund account management, institutional and product management, information disclosure, and supervision.

1. What is a personal pension?
   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, with mandatory participation. Currently, this pillar occupies an absolute proportion. Enterprise annuities are voluntarily established by enterprises based on their economic strength and conditions. This pillar mainly depends on the enterprise 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, while annuities also have a share, but personal pensions are almost nonexistent. 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, and contributions are entirely borne by individuals. This means that all this money is contributed by you, and the accumulated amount will be whatever it is. 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 the regulations or through designated financial product sales institutions.

Various financial sales institutions will compete to "attract customers," 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 each year, and this limit may be adjusted later. The investment income in personal pension accounts will not be subject to individual income tax temporarily, but a 3% personal income tax will be levied when withdrawn. If your individual income tax is 3%, there is actually no difference. If your individual 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. Public funds are regulated by the China Securities Regulatory Commission, while bank wealth management, deposits, and insurance are regulated by the Banking and Insurance Regulatory Commission.

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 subscription restrictions and sales fees can be waived (except for legally required fees that must be charged and included in fund assets), and certain rate discounts can be applied to management fees and custody fees."

No subscription fees can be charged for bank wealth management.

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 suitable for long-term investment in personal pensions, with stable investment styles, clear investment strategies, good long-term performance, and compliant and stable operations.

Pension target funds are the first choice, but other types of funds are also within the scope. This list is published by the China Securities Regulatory Commission 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 key 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 individual 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, Teng'an, Jiyu, Yingmi, Huicheng, and Tonghuashun. Of course, there may also be institutions where individual 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) Settling abroad;
   (4) Other circumstances specified by the state.

If a participant passes away, 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 personal pension account, this could bring an annual incremental fund of 840 billion yuan. If we assume an average investment ratio of 75% per person, it would also bring an annual incremental fund of 630 billion yuan.

First, we need to look at the level of participation. Secondly, the design of personal pension products is primarily focused on stable 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, consider the question: what will you rely on for retirement? Some say having money is enough, which may mean relying on cash; others believe in relying on children for support, which may mean relying on children's education funds. Of course, entering old age, diseases, etc., can also 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, you can understand protective assets 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 do retirement planning — A beginner's tutorial#

Here is a process for your reference. 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 income, plan human capital. Are you engaged in a "steady progress" job that 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 near-term income and higher long-term income. The latter is the opposite. Here, "work" is broadly defined and includes entrepreneurship.
   From the perspective of expenditure, 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 money needs to be left for family members, etc.

2. Clarify financial goals
   In this step, we need to translate life planning into feasible financial goals.
   (1) First, based on career planning and consumption levels, roughly estimate possible future 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 work, after deducting expenses, he saves 70,000 yuan annually. In the first year of retirement, he plans to spend 100,000 yuan (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 lifespan of males at 80 years and females 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, in Excel, input the cash flows mentioned above in column A, with each number representing one year's cash flow, totaling 20 rows (20 years of work, with an annual income of 70,000). Below are 35 rows of -10 (retiring at 45, living until 80, totaling 35 years, with annual expenditures of 100,000).

Find another 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 input. 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 adjusting for inflation.
Next, estimate the actual required return rate, adding CPI (Consumer Price Index) to the 3.54%. 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 feel "nervous" about losses, indicating that the risk level of their investment portfolios exceeds their tolerance, which may lead to anxiety and even panic selling at the bottom.

Everyone has a different risk tolerance level. If you have experienced several bull and bear markets, you can roughly recall the extent of drawdown that caused you severe anxiety and led to panic selling. For example, I can tolerate a drawdown of about 15%.

New investors tend to overestimate their risk tolerance. In principle, new investors should aim for a drawdown of less than 10%. As investment experience increases, risk targets can be redefined 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, emergency 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 what proportion to invest in each asset class. Here is a quick reference for beginners.
   Using historical data since October 2016, select the Jiashi Research Alpha (close to the equity fund index) as the representative stock fund and the Yifangda Zhongzai New Comprehensive Index as the representative bond fund. Assuming only investing in stock and bond funds with a holding period of one year, calculate the average returns and maximum drawdowns for different stock fund holding ratios.

Based on the previous example, Mr. A's target return rate is 8%, and his risk tolerance is "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 20% return but can only tolerate a 10% drawdown, it is challenging to achieve these goals using public funds. In this 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 more than three years of idle funds, and bonds should only be considered if there are more than one year of idle funds.

The long-term stock-bond allocation ratio determined above is called "strategic asset allocation." Advanced investors can also perform tactical asset allocation, adjusting the stock-bond ratio based on strategy research, stock-bond cost-effectiveness, valuation indicators, etc., to potentially achieve excess returns or reduce risks. For example, one might overweight stock funds near the 3,000-point mark. 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 state has established tax incentives for pension savings, which include eligible bank wealth management, savings deposits, commercial pension insurance, and public funds. Taking funds as an example, there are mainly two strategies:
   (1) Select excellent funds. A relatively friendly approach for beginners is to refer to authoritative rankings, 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, the ratings from Tiantian Fund can also serve as a reference.

For experienced players, one can explore hidden gem fund managers based on reports, holdings, etc.; or use quantitative models to screen funds; or rotate based on macroeconomic and strategy research. Seeking excess returns is a highly professional task and is not recommended for most retail investors. Entrusting it 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 diversified and highly correlated with the equity fund index, such as Jiashi Research Alpha or Xingquan Preferred Progress FOF, can also fall under this strategy. The spread-the-risk strategy does not participate in speculation, enjoys average returns, and eliminates the risk of underperforming the average, which is a great wisdom.

Regardless of the approach, purchases should be made according to 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 (F000082) and 50% Yifangda Zhongzai 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 bond broad-based 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 threefold:
6. Regularly assess whether your life planning and financial goals have changed. For example, if your salary increases significantly, you might consider increasing your contributions to shorten the time needed 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. Increasing risk tolerance in a bull market and decreasing it in a bear market is a big taboo; be very careful.

2. Rebalance the investment portfolio. As the market fluctuates, the proportion of each fund will change. If new funds are added, try to restore the proportions of the funds to their original levels. For example, the recent bear market may 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, adjustments should be made according to the pre-planned schedule, generally on an annual basis. Absolutely avoid frequent operations based on short-term performance; short-term high returns are often a reverse predictor 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 the above 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. It is based on an analysis of the population age structure, determining how many young people support each elderly person.

To be precise, 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 funds? Separately managing different types of funds is like tagging this money with exclusive labels, allowing us to have more accurate expectations for this investment.

Today, I want to share the four funds planning and account classification of a post-90s girl, @Tongluren Benyi, hoping to inspire you.

Benyi has two major financial accounts: a backup fund account and a small pension fund.

Among them, the backup fund account is meticulously divided:

1. Living backup fund account
   Do not use it unless necessary; it is currently placed in a money market fund.

2. Sense of security account
   Not for lying flat, but to leave enough buffer and adjustment space for risks. When unexpected risks arise, it does not affect family security expenditures. It is currently placed in a money market fund, and will later increase some stable investments.

3. Parents' backup fund
   As an only child, I save an extra sum for my parents. It is currently placed in stable wealth management.

In long-term investments, Benyi only has one "small pension fund," which includes both her and her parents' pensions. Of course, there are also some previous miscellaneous purchases that need to be gradually resolved...

Regarding retirement, she has developed a detailed plan, divided into offensive and defensive strategies.

Using the national basic pension insurance and fixed-income commercial pension insurance to provide basic security; at the same time, purchasing long-term equity assets as an offensive strategy to lay a solid foundation for a quality retirement life.

Benyi's plan is to first fill the three backup fund accounts, and then increase the investment in "pension targets."

• The above is just a sharing; using the story of a fellow traveler to help fellow travelers does not constitute investment advice.

• If you also want to share your four funds classification, please feel free to click the questionnaire to submit.

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Rest assured, the 3% individual income tax on the investment income has been considered.

Participating in pensions: principal * (1 + investment return rate) * (1 - 3%)
Not participating in pensions: principal * (