Diverse Asia: Family structural change
and retirement security in Asia
Family structures evolve, and the implications of these shifts continue to be a highly complex issue. Moreover, familial support can vary significantly across markets and must be understood in specific social and cultural contexts. For this insight piece, we’ve elected to consider familial changes in each of our four markets across the following dimensions:
Horizontal: determining how household sizes have changed in recent decades
Vertical: considering contemporary surviving generations and living arrangements in the household
These dimensions (household sizes and living arrangements) have been chosen because there are overlaps between the concept of “family” and “household.” While the household is one of the most commonly used social and budgetary units (Fan, C.C., 2022), for older adults, their living arrangements are usually a significant determinant of their economic welfare (Tung & Lai, 2012). Living arrangements also imply the availability of different types of familial support.
Over the last two decades, the average household size (the horizontal dimension) across all four Asian markets has been shrinking gradually, although the rate of change is less significant for Indonesia2:
In Hong Kong, the average domestic household size has fallen from 3.3 persons in 2000 to 2.7 persons in 2021.3
In Taiwan, the average domestic household size has fallen from 3.3 persons in 2000 to 2.8 persons in 2020.4
In Malaysia, the average domestic household size has fallen from 4.6 persons in 2000 to 3.8 persons in 2020.5
Whereas in Indonesia, the average domestic household size increased from 3.9 persons in 2000 to 4.0 persons between 2005 and 2009 before returning to 3.9 between 2010 and 2019 (the most up-to-date data available).6
According to our observation, shrinking family size is a common trend among most of observed markets. How about living arrangements?
Chart 1 paints a broad-brush international comparison of living arrangements for the world’s major markets. Compared with developed markets in Europe and North America, living with adult children (therefore likely more shared monetary support) has still been the mainstream living arrangement of older adults in Asia, regardless of observed shrinking family size. Notably, Asia also has the lowest rate of its older population living alone globally.
Living arrangement (or co-residence in some literature) is usually treated as a proxy to indicate the availability/mechanism of familial social support, especially instrumental or emotional support, which is mainly provided with physical presence of family members.
To most Hong Kong citizens, maintaining the same standard of living in Hong Kong for years after retirement seems like a challenge. And most older persons in Hong Kong are more likely to live in the domestic household instead of non-domestic households (e.g., hospital, elderly homes or other third places represent less than 10% of total older persons according to 2016 Census and Statistics Department Figure).
But what if Hong Kong retirees choose to move to another city where the cost of living is lower, so they can enjoy the benefits of a lower cost of living while still retaining easy access to Hong Kong’s quality healthcare system?
This illustrative example explores a way to acquire a second home in a lower-cost area post-retirement. The charts below (using Hong Kong as the base city) shows that the overall cost of living (consumer prices excluding rent) in Greater Bay Area cities such as Guangzhou, Shenzhen, Zhuhai, and Dongguan can be as much as 20% to 40% lower than living in Hong Kong. Rent is the key differentiator, which is estimated at 60% to 80% lower in these four areas. This means retirement living in these Greater Bay Area cities requires much lower spending when compared with retiring in Hong Kong.
Therefore, while many worry that their retirement funds aren’t sufficient to support quality retirement living, the place they live when they retire could make a significant difference in how long their savings last to support their retirement.
Source: Manulife study; data from EIU, data as of September 2022.