The Ultimate Guide to Planning for Your Retirement in the Philippines

Planning for retirement should be done as early as possible. For one, setting aside and investing money today will yield higher returns in the future since compound interest can grow your savings. At the same time, early preparation will help you determine which financial tools you’ll need to purchase to attain your desired lifestyle.

Unfortunately, many Filipinos tend to make retirement planning the least of their priorities. Often, money is spent on immediate financial needs versus planning for the future. As a result, research shows that Filipinos don’t usually have enough money set aside for their golden years.

If you want to live comfortably upon retirement, you’ll need to be a step ahead and make the right decisions with your money.

Being aware of the different sources for your retirement fund and how you can grow it will take you one-step closer to a better future. To get you started, the guide below will discuss everything you need about retirement planning.

Setting financial milestones for each life stage is essential. The goals you’ve decided on will guide you towards the right decisions and help you attain long-term financial stability. As a young professional, you’re likely saving up for many big investments such as a house, a car, and your child’s education. While it may still be a few decades away, you should remember to save up for your retirement, as well.

The small investments you make today will yield more returns than the bigger investments you’ll make in the coming years. Apart from letting you live comfortably, early planning will give you more flexibility when faced with a medical emergency or a crisis as big as COVID-19.

With that said, you may be wondering how you can effectively build a retirement fund. The guide below will discuss everything you need to know about retirement planning.

5 Best Sources to Build Your Retirement Fund in the Philippines

1. SSS (Pension plan)

   If you’re an employee of a private company, ask your manager or HR about your retirement benefit. Being aware of your employer’s policy will help you determine the amount of your SSS pension, especially if you plan to stay for the long run.

2. Personal Equity Retirement Account (PERA)

   A pension plan may give you a decent amount of cash, but it won’t be enough to cover all your future expenses, no matter how big it may be. Instead of letting your money sit in a regular savings account, one good way to grow it would be to open a personal equity retirement account (PERA).

   Having a PERA account is extremely beneficial since it entitles you to numerous tax benefits. Once you reach 55 years old, you can withdraw your investments tax-free and boost your retirement fund even more.

3. VUL Insurance

   Thanks to innovations in the insurance sector, insurance policies today are more comprehensive. Along with death, illness, and disability coverages, most plans are now paired with investment benefits. Apart from giving you a stronger sense of financial security, investing will also grant you a passive source of income. With this in mind, getting a variable unit linked or VUL insurance plan will be one of the best purchases you can make. This financial instrument invests the premium you pay in various channels (such as stocks and bonds) while providing extensive benefits until death.

4. Real estate investment

   Whether it’s a small building in the city or a rest house in the province, real estate is a very lucrative investment.

   If you don’t plan on using your property personally, renting it out will grant you a passive source of income in your retirement years. Also, real estate properties will only appreciate through time.

5. Investment funds

   If you’re playing the long game, stocks, bonds, and mutual funds can be great investments. Compared to traditional bank accounts, these financial instruments can potentially yield higher returns over the years. However, there’s no denying that investment funds and the like can be difficult for beginners to comprehend.

   Taking your time to research or hire a professional's services will ensure that your venture goes smoothly. But before you close officially close a deal, it’s also important to be aware of the risks that come with your investment. Having a sound strategy in place will help you mitigate risks while maximizing returns.

6 Key Retirement Planning Steps to Secure Your Future

Setting financial milestones for each life stage is essential. The goals you’ve decided on will guide you towards the right decisions and help you attain long-term financial stability. As a young professional, you’re likely saving up for many big investments such as a house, a car, and your child’s education. While it may still be a few decades away, you should remember to save up for your retirement, as well.

The small investments you make today will yield more returns than the bigger investments you’ll make in the coming years. Apart from letting you live comfortably, early planning will give you more flexibility when faced with a medical emergency or a crisis as big as COVID-19.

With that said, you may be wondering how you can effectively build a retirement fund. The guide below will discuss everything you need to know about retirement planning.

1. Set your retirement goals as early as now

   At what age would you want to retire? What assets would you like to own?

   Asking yourself these kinds of questions is the first step in setting your retirement goals. Knowing what you want to achieve when you reach a certain age will align your career and financial decisions accordingly.

2. Determine your retirement lifestyle

   Do you picture yourself traveling frequently? Do you plan to run a business?

   Knowing the kind of lifestyle you want to live is essential since it will ultimately determine your future spending needs. If you plan to take trips and cross out entries on your bucket list later in life, you need to find ways to earn more or start saving up earlier.

3. Protect your income through insurance

   One of the best ways to secure a happy and comfortable future is to have a safety net in place. As previously mentioned, some insurance policies can grant you premium coverage while letting you earn through an investment component.

   Other than buying insurance for you and your family members, consider purchasing insurance for your other assets. In case of a sudden emergency or breakdown, having your home or car covered would help minimize your losses.

4. Consider possible health expenses

   Health complications tend to arise with age. If you have underlying medical conditions, you should consider the possible health expenses that may come your way. Eating healthy and having enough exercise will help you avoid hefty hospital bills, but another way to acquire breathing room is to invest in a health insurance plan. For instance, an insurance policy such as the Critical Care 100 will give you and your loved ones some flexibility, especially if you come face to face with a critical illness.

5. Don’t put all your eggs in one basket

   As you canvass for investments, always remember that even when a particular stock may seem enticing, it’s best if you don’t get over ambitious and place all of your hard-earned money in it just in case it takes a turn for the worst.

   The best way to counter this issue is to diversify your portfolio. Having a fair share of high, middle, and low-risk investments will ensure your financial stability even if one of your ventures end up failing.

6. Strategize according to your time horizon

   Your current and your ideal retirement age will serve as the foundation of your strategy. Younger professionals have a higher risk tolerance since they have enough time to recover from a bad investment.
   
   Meanwhile, professionals who start retirement planning past their 40s must take on safer investments. Understanding your time horizon will help you determine which strategies will work best for you.

Secure a Better Future

Retirement may not be the first thing on your mind right now, but you should prepare for it nonetheless. While it may still be a couple of decades away, opening a PERA account, setting retirement goals, and investing in different ventures will grant you a stronger sense of security for the future. This way, you’ll be able to provide your loved ones and yourself happy, healthy, and comfortable lives.

If you’re looking for VUL insurance plans, we’ve got you covered. BPI AIA makes it easy for you to get insured amidst the COVID-19 crisis. Set a virtual appointment with one of our Bancassurance Sales Executives to learn more.