By Jay Ledesma
Planning for your retirement just as important
WHEN you ask most parents if they were able to save or invest in educational plans for their children, there’s a strong likelihood that the answer is a big yes. But ask again if they have secured funds for their own retirement, it’s most likely that their response is the opposite. This is the common scenario whenever I have discussions with fellow parents. They will share with pride how they were able to secure the education of their children. Sadly, they’re not as confident when talking about their own retirement preparations. Reasons such as “I still have more time to prepare for that, or “That’s next in my priority list”, or “Bahala na mga anak ko” (my kids will take care of me), is what you will most likely hear from them.
While it’s every parent’s responsibility to prepare and provide their kids the best education there is, let’s be mindful that preparing for our own retirement years is just as important. Let’s look closely at these realities:
Unexpected risks do happen. This pandemic showed us that no matter how well we planned, unexpected risks can completely alter if not erase all of those plans. A number of my friends were forced to early retirement because of the pandemic. before the crisis, they have computed how much they will receive and made plans on their retirement when they reach the mandatory retirement age of 60 or 65. Then pandemic happened and businesses were adversely impacted. Some of my friends were fortunate enough to have received some retirement/separation benefits from their employers but were quick to admit that the amount they received will only last for at least 6 months. But some were not as lucky. As their companies went bankrupt, they cannot even get their due retirement/separation benefits. The main source of the retirement funds they are depending on disappeared in thin airs. Even if they get re-employed, do you think they have enough time to rebuild their retirement fund?
The government retirement plan is not sufficient. Whether it’s SSS or GSIS pension, the amount is not enough to sustain our pre-retirement lifestyle. I have witnessed this with our own relatives and close friends who rely on government pensions. Even if they are getting the maximum pension amount, it will never be enough to fund their daily living needs, medicines and vitamins, and worst their medical bills. They cannot even afford simple travel. Sadly, they have to live only as much as their pension will allow. This is definitely not what we have in mind when we dreamed of our retirement. But we already know early on that our SSS or GSIS funds can never be our main source of retirement funds. Even before we retire, we already know the amount is not enough vs our requirements. The question is, what did we do to ensure that we have enough when the time comes?
Our retirement is not the burden of our children. In our Filipino culture of a closely-knit family, it’s difficult to accept that as parents are obligated to provide for their children, our children are not obligated to provide for their parents. Good if they will provide for us, and even this should be done voluntarily and not out of obligation. But if they can’t, don’t, and won’t, we can never take that against them. When our children start earning their own income, their responsibility is to save for their future (their own retirement) and if they are married, for the future of their family. It’s not being heartless or ‘walang utang na loob’ (lacking in gratitude). It’s just how it is and should be. This is how we should guide them so we promote the value of financial independence. My fellow parents, our retirement is our own lookout. When our children see that we properly prepared for it, they will also do the same when it's their turn. Our children started saving and investing in their early 20s because they learned and saw that from my husband and me early on. I am confident that it’s the same discipline they will pass on when they will have their own children. How have you prepared your children for financial independence?
Longer life expectancy. Dying too soon is not the only risk in life that we have to prepare for. Living too long is also considered a serious risk, especially when you have the necessary funds to support yourself. This a concern of the different generations of today because science and technology made it possible for us to live longer. The current life expectancy of Filipinos is between ages 70-75. With more people getting conscious about health and wellness, this is even expected to go higher in the coming years. This simply means the more we need to have enough funds to support our longer retirement years. I retired at the age of 55. If I have the average life expectancy, I have to provide for myself for the next 20 years. Can you just imagine what may happen in the next 20 years if we don’t have enough retirement funds?
We can grow our money and beat inflation. The sooner we start and the longer time we stay invested, the higher the chance we grow our money and beat inflation by the time we retire. The value of our money when we saved/invested will be lesser by the time we retire as inflation kicks in. Putting it in a long-term investment instrument will allow us to grow our money over time. That’s why the sooner we start, the better. As we always say, it’s not timing the market but time in the market that matters. The technique is to invest consistently so we maximize the benefits of cost averaging (the practice of investing consistently over a period of time). We lose this advantage when we start late in building our retirement fund as our tendency is to time the market or fall into investment scams in the hope of getting higher yields quickly. This proves to be a more dangerous route, especially when talking about your retirement funds.
Will you allow your money to grow and beat inflation or will you allow inflation to beat and eat your money?
More retirement plans/instruments available. Unlike in the past when the tools and instruments to build retirement funds are few and limited, we now have varied options to choose from which are more accessible. Depending on your risk appetite, budget, and time horizon, you can choose from the traditional pension plans, or investment insurance plans, or you can put in mutual funds, or do direct stocks trading. Even G-Cash has G-Save and G-Invest where you can start with as low as P50. Should you need one, you can ask for the assistance of investment advisors or financial planners on how to start your retirement program or for any clarification. And Mr. Google is always available anytime, anywhere. You just need to have the resolve and commitment to start with one and keep it. What’s still stopping you from taking that first important step?
The majority of our workforce now belongs to the Gen Y and Z generations. Retirement may be far from your mind now but this is exactly the right time to start doing something about it. Ask anyone who is now in their retirement age and everyone will agree to this. If only they have done it sooner and properly, then some retirees need not continue working because they needed to and not because they wanted to. Retirement plans from our Company and the government are good to have. But they should not be our only source for the reasons cited above. We have to build our own.
Empower yourself now so you can dictate the terms of your retirement. You owe that to yourself!
About the Columnist
Ms. Jay Ledesma writes about local tourism and business bits that delve on investments and insurance.