How to start planning for your retirement
In the Philippines, the retirement acknowledged age starts at 60 years old but most companies follow the prescribed compulsory retirement age of 65. Based on this standard, if you’re young, you might think it’s too early to think about retirement. Likewise, if you think you’re too old, you might feel you’re too late to even start since retirement is just a few years away.
But in the Filipino context, retirement is not always a fixed period especially for those who feel that they can still work beyond the prescribed retirement age. Some might want to work longer for a variety of reasons but in many cases, they have to work because they know they have not saved enough for their own retirement. Others might even want to retire earlier than the prescribed age so that they’d still be physically capable of doing their passions.
Starting your retirement fund early
It’s true that starting your retirement fund when you’re younger is more prudent as it allows you to implement your plan way ahead and make adjustments. You can also leverage on the much longer time frame to let compounding interest grow your investment, if you have any.
Some investment types, such as time deposits, privately owned provident funds, and government social security services have investment products that grow ever larger through compounding. You may also want to invest in dividend-earning stocks and bonds wherein the interest you earn can either be put back into your investments to further grow your portfolio.
Keeping up through investments
But how about those who have only started out planning their retirement when they’re already older, like in their 40s? Is it too late? Not necessarily.
For older, still-employed people, It’s still possible to build a retirement fund from certain investment instruments, which can include stocks, bonds, mutual funds, and insurance (yes, insurance is also a form of investment).
If you’re an older person, you may also consider utilizing some of your existing assets to generate additional income streams, such as renting out a property that you own. The good thing about this is you can still gain some income even if you’ve already retired.
What is important though is to start thinking about retirement now, whether you’re just a young college graduate or an experienced professional who has realized the need to have a happy retirement.
In general, retirement planning starts with the following:
- Calculating how much money you’ll need;
- Setting priorities and creating a realistic budget; and
- Boosting your income.
As with any good financial plan, knowing how much you need is the first thing to consider. Think about your current lifestyle and whether you want to maintain or upgrade it. Have a ballpark figure in mind so that you can then create a monthly budget. It’s a good idea to consider your retirement fund as an expense, similar to your rent and utilities. It is an item that should be a part of your regular budget, no matter how much you earn.
You can also adjust your retirement strategy depending on your current situation. Your retirement fund can change throughout the years. You may want to add more or not, depending on your priorities. Regardless, you should always set aside a percentage of your salary to your retirement fund.
You can also try boosting your income by upskilling or investing. When you can earn more money, you should also increase the amount of money you set aside. Doing this consistently and diligently will remove a lot of weight off your shoulders, especially when you are an older professional who is looking at the retirement age set by your company.
