rocking-chair, retirement
Rocking Chair, Retirement (photo by: Hitokirihoshi)

You are young, sexy and healthy, but are you wise enough to think about your future?  While there are remedies to stay pretty and svelte, there are things that can’t be stop to happen like the natural and gradual changes in human energy. Soon, whatever dos for you before are your ultimate don’ts today.  It is same with working, you have source of income today because you are working, but what about if you already turn 60 years old.  Will you be contented to retire in a rocking chair wishing that you have money for your vitamins and gardening endeavors?

Filipinos are usually adamant when it comes to getting old and retirement.  Their imaginations of the future are limited to having own family, buying a house and lot, traveling around the world or  anything people  fantasize in watching movies and T V series.  However in truth everyone should prepare for the period that they get easily tired of doing house chores and office works. In fact if people start early in creating their retirement funds they can afford to stop working and experience financial freedom so early too.

Visualizing how and when you want to stop working is also crucial in creating your retirement fund.   Normally in the Philippines, at the age of 60-year old employees are automatically bid goodbye in the work field and start to depend on their pensions. Do you think your monthly SSS or GSIS pension is enough to cover all your needs by that time?  If you like to counter your possible financial woes in the future, better to follow 20/20 retirement rule.

“Most financial planners follow the 20/20 rule. If you plan to retire at age 60 and hoping to live 20 more years after retirement, you should start saving and building your fund at 40 years old. Take note though that the idea is to save as much as you can for your retirement fund, so starting earlier than 40 years old obviously has its advantages,” Jesi Bondoc, RFP©, shared on MoneySense.com.ph.

In connection to this 20:20 rule, it is advisable that young ones should also venture to various passive and long-term investments that give little risk but high yields. There are many kinds of investments you can choose from, but financial experts recommend getting mutual fund, stock market, and UITFs (Unit Investment Trust Funds). The good news is more and more institutions are now offering easy investments programs (EIP) that let small-time investors to join with as low as Php 1000 fee per month like Banco De Oro has.

On the other note, it’s a no-no that you make retirement fund out of your bank savings. Why? There’s such thing called “inflation risk” or the devaluation of money. It’s like if you have as much as 1 million in savings in 2015, its value is not the same in 2025 so choose better option.

“If you invest your savings, on the other hand, there’s the potential to beat inflation and earn more money for retirement. (And those rounds of golf you’ll be playing.) Compound interest is a powerful thing. Consider the idea that if you were to invest just $2,000 a year from ages 25 to 65, earning 8% a year, you’d have more than half a million dollars in the bank. Save 10% to 15% of your salary, and you’ll have exponentially more,” Forbes’ report about Retirement Savings.

Another note for retirement savings through time deposits or bank accounts is the tax issue.  There’s 20% tax on interest income on long-term deposits, particularly those cancelled in less than three years, compared to capital gains tax and stock transaction tax.

Investing for your retirement can be the least in your priorities, but better to start it now even if you keep only small amount.  What’s important is you do it consistently for years before you stop working.  In fact, for financial experts the real asset is not the money, but your time.

“Time, not money, is your biggest asset in life. You need time to invest in relationships (with yourself and your family) or to chase your passion.
“Think again” if you are still trading off time for money.
Let your money work for you. You don’t work for money. That is exactly what Financial Freedom is…” Manoj Arora, author of From the Rat Race to Financial Freedom commented.