Planning for Tomorrow: How to Guarantee a Life of Security After Retirement

Planning for a happy and satisfying retirement requires careful and methodical planning, especially if you want to ensure that you live your twilight years comfortably. The truth is, the earlier you start envisioning your ideal retirement scenario, and working towards the achievement of this financial goal by way of strategic investments, the bigger your chances are of turning it into a satisfying reality.

It may be tempting to put planning for your eventual retirement on the back burner, especially in the face of the ongoing coronavirus pandemic. But think about it - as meager and seemingly insignificant as your savings are at this time, religiously storing away any extra amount can contribute to growing and fortifying your retirement fund. And while it is never too late to start working on your retirement fund, you also have to realize that time is of the essence - the sooner you determine what your retirement goals are, the quicker you can prepare for and act on these.

Typically, the retirement age is at 60, although depending on your personal reference and available opportunities, you have the option to either extend your employment for another 5 years or opt for early retirement. Yes, early retirement is actually possible, especially if you have already laid down a solid groundwork for it. So if you want to bid your 9 to 6 job “goodbye” earlier than usual, read on, and start making your “exit strategy” today!

One of the first things you should ask yourself when planning for your retirement is how you envision yourself in retirement. Do you want to lead a quiet and simple life away from the hustle and bustle of the metropolis? Are there specific hobbies and activities you would want to engage in now that you actually have the time and the means to do so? Will your children be out of the home by this time, or will you still have dependents to provide for?

While these do not have to be 100% certain yet, becoming aware and acknowledging exactly what you want for yourself and your loved ones, and then noting these down, can help you determine how much you need to have to be able to achieve these goals.

When it comes to planning for your retirement, ask yourself - what do I hope to have and achieve by the time I reach my preferred retirement age? Will my retirement fund be able to provide for these, or will they simply remain as dreams? The thing with dreams is that they can be accomplished with proper planning and guidance. You know what they say, “If you can dream it, you can do it.”

Let’s assume that you have already ascertained how you want to live your retirement years - it’s now time to put your retirement fund planning into action.

When it comes to building your retirement fund, numbers are very important. According to financial experts, the ideal retirement fund should be approximately 80% of your final pre-retirement salary. As such, if you make roughly PHP 6 million annually by the time you reach your retirement age, you must then allocate at least PHP 4.8 million per year after leaving the labor force to have a comfortable life.

Aside from age, inflation is also a reality that you need to consider when planning for your retirement. Sadly, what may seem like a fortune today may already be deemed insufficient in 20 or 30 years. It would be highly beneficial to make your post-retirement spending plan as clear and detailed as possible, especially as cost of living expenses go up exponentially per year. Some expenses that you may wish to save up for would be real estate, leisure and entertainment, and perhaps most importantly, healthcare.

By understanding your retirement needs, you can now identify the steps that you need to make to be able to achieve your financial targets, and within your indicated timeline. Is your retirement plan achievable or do you have to make some tweaks to it to make it more realistic and feasible?

If you are a full-time employee, one of the most important things that you should do would be to check if your organization offers a retirement benefit. There are a number of companies in the Philippines that contribute a specific amount to an employee’s retirement fund, which is normally equivalent to at least one-half (1/2) month salary for every year of service rendered. Knowing how much you stand to get from your company can help you get a clear indication of the amount you need to make in order to meet your retirement fund goals.

If you are not familiar with how your company computes for your retirement benefits, reach out to your colleagues in Human Resources to find out how it works. Ask for a projected computation of your retirement fund, and check if it would be possible to increase your contributions to allow you to build your retirement fund faster.

In addition, the Philippine government, by way of the Social Security System (for employees of private organizations) and the Government Service Insurance System (for government employees), also offer retirement benefits to employees.

The Social Security System (SSS) offers two kinds of retirement benefits: a monthly pension, which is available to all retirees that have been able to make at least 120 monthly contributions prior to his retirement; or a lump sum amount, which can be extended to a retiree that has been unable to make 120 monthly contributions before he retires. This lump sum amount will be equivalent to the total contributions that an employee and his employer have made, including interest.

The Government Service Insurance System (GSIS), on the other hand, offers a variety of retirement packages to employees, which depend on their age, length of service, and prevailing legislative terms and policies.

Learning the true cost of your retirement can be both exciting and overwhelming. Don’t let nerves get the best of you - instead, look into what you have and what you are set to receive, and determine how you can make up for the difference.

Life does not always go as planned, despite our best efforts. If there is anything that is certain in this world, it is uncertainty. Your status now may change within 3 to 5 years. You may get married, have children, move to a different job, or even choose to go into entrepreneurship. For any of these reasons, your capacity to save can change, and may even cause you to touch, withdraw, or loan against your savings or retirement fund.

To protect your retirement nest egg from unnecessary withdrawals, you can consider opening a personal retirement account. Aside from higher interest growth to enable your money to grow with time, you should also enroll your personal retirement account with a banking institution that gives bonus interests if you do not make any withdrawals within a certain period.

While you can shop around for the personal retirement account yourself, it would also be good to seek advice from a licensed financial advisor or agent, who can help you identify the best place to secure and grow your money.

Warren Buffett, a highly-respected American investor and the so-called Oracle of Omaha, once said,

Relying solely on your full-time job may not help you achieve your retirement goals, no matter how big your monthly salary may be. That is why it is crucial to invest in other credible income-generating options. Get rich quick schemes are out of the question, of course - choose to invest your hard-earned money in products and organizations that have an excellent track record in fund and wealth management.

Keep in mind that to actually earn from your investments, you need to be patient and dedicated to it for the long term. You must likewise possess a good understanding of market trends and developments so that you can gauge whether or not you can withstand its numerous ripples. Otherwise, less aggressive investment options such as treasury bills or mutual funds, which are also available with most major banks, may be more suited for you.

Here are some options that you can consider to further reinforce your retirement fund:

• Personal Equity Retirement Account: The Personal Equity Retirement Account (PERA) is the local counterpart of the Individual Retirement Account (IRA) and 401(k) contribution plan in the US. It is a voluntary retirement account that can be used solely for investing in PERA investment products in the Philippines, which includes government securities, exchange-traded bonds, and pre-need pension plans, among others.
• The PERA can be availed through banks, insurance companies, and agencies accredited by the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and the Philippine Insurance Commission. You can invest up to PHP 100,000 per year, and enjoy tax-free returns.
• Variable Unit-Linked Insurance Plans: A Variable Unit-Linked (VUL) plan is a type of insurance policy that effectively combines the growth potential of investments, and the coverage of a life insurance policy, into one product.
• Taking out a VUL plan with a credible VUL plan provider, such as Allianz PNB Life, offers its policyholders a certain degree of protection, while helping grow their retirement fund. First, the insurance component of the VUL plan provides for a death benefit payout for the policyholder’s beneficiaries in the event of his untimely passing. Next, professional fund managers take care of the investing for you, and only place your money with high-performing investment products.
• To find out more about Allianz PNB Life’s Variable Unit-Linked (VUL) plans, click here.
• Endowment Fund: An Endowment Fund is another type of insurance product that provides policyholders with a lump-sum or monthly payout upon its maturity, similar to a pension plan.
• Unlike a VUL plan that has an investment component, an Endowment Fund offers living benefits when the policyholder survives the term of his policy, and death benefits to his beneficiaries in case he passes prior to the policy’s maturity.
• Nonetheless, it is still a worthwhile savings product to look into, especially when you are averse to the liabilities that come along with investing in moderate to high-risk investment products. Additionally, endowment funds offer protection and coverage until the age of 85, when health issues are a common occurrence and expense.
• If you are interested in finding out more about the benefits of an endowment fund, you can check out Allianz PNB Life’s Intensify! plan. Aside from offering a lump sum maturity benefit when you reach 85 years old, the Intensify! plan also provides guaranteed cash payouts, along with continuous insurance coverage, at certain periods throughout the duration of the policy.
• For more information about Allianz PNB Life’s Intensify! plan, click here.

Think of your retirement fund as an appropriate and hard-earned reward for the years of work that you have put in. By making the effort to build your retirement fund as early as now, you are laying down a solid foundation to providing yourself with a healthy, happy, and fulfilling post-retirement life. As they say, “Retirement is not the end of the road; it’s the beginning of the open highway.”