Contemplating on Retirement
I remember one time when our family went to two provinces to visit some old relatives. In one province is a retired private high school teacher–91 years old, unmarried, living with a caregiver and is occasionally visited by a niece. In the other province are two unmarried women, both in their mid-80s and living with a great grand-son who is taking care of them.
All of them seem to be in good health except for the usual joint pains or hypertension typical of advanced age. But they still have very sharp and clear minds. The lolas are all living in pension. The two eighty-year-olds are maintaining a small sari-sari store to help support their expenses. Yet, their income and pensions are just—and sometimes—barely enough to sustain their day-to-day needs.
As we bade goodbye to them, the reality of old age and retirement sinks into me: How will I be during retirement? What will my retirement be like? Would I have enough resources set aside to support my retirement life? Or will I always be dependent upon others? I am now halfway towards retirement age. I should be halfway towards my retirement goals. But sometimes, it feels tmy retirement fund is still not enough.
In the United States, retirees are feeling the pinch of retirement: rising healthcare costs, sustaining daily needs, a life longer than expected, and rising prices of goods. In Japan, the pinch is felt too: retirees are forced to look for a job just to sustain their needs. Here in the Philippines, we are luckier as our societal structure provides for elderly care in the family wherein support of the elderly parent or relative is provided for by family members.
But what if the family members themselves are struggling for their own families’ upkeep? Prices of goods are increasing at an average of 4 percent to 5 percent historically. Pensions are there but cannot really be counted on to provide for our future needs.
Fitforwealth.com has done a sample computation for SSS pension benefit: a monthly SSS contribution of P1,590 per month for an employee that has worked for 30 years in a company shall yield a pension of P9,300 per month. Today, that figure will amount to virtually nil when we speak of monthly expenses. But if that is the value of the pension 30 years from now, it’s present value today is just P2,151.81, discounted with 5 percent average annual inflation.
I have given retirement planning sessions to a lot of people already and, truth of the matter is, almost each of the prospective retirees, near-retirees and retirees themselves say with regret, “I wish I had prepared earlier!”
For what can an average retiree get? P1 million at age 60? Going by that figure, that means P50,000 yearly, or P4,166.67 per month. We all know how much of a monthly allowance is comfortable enough, and these figures are not as reassuring. And we still haven’t considered hospital,, medical, and other health-related bills that can easily eat up the retirement savings and pension plan.
Now these are not cause for panic, but of mere concern. And with all concerns are solutions that are within reach. One should not necessarily be subject to the vicissitudes of life, most especially when one can do something about it.
What can be done then? The answer depends on the person contemplating retirement. Each person is unique in that he has his own goals and stage in life. A yuppie, who is thinking of starting a retirement kitty is in a much better position to make a very comfortable retirement life than a person who is just thinking on the same thing at age 40.
Thus, the approach towards securing their retirement life will be much different. For the younger person, a more aggressive approach can be done to build up his retirement fund: investment in stocks will be very much recommended. The older one, on the other hand, will be advised to pitch in a higher amount to offset the lost years of investing for his retirement nest egg.
These are just starters as different financial instruments can be availed to add up for retirement income stream. One such instrument can be preferred shares and bonds that can give a steady stream of income for the retiree.
A cookie-cutter approach towards retirement is just a starting point in securing one’s retirement. What is best is to talk with an objective and unbiased professional who sits down and listen to the retirement needs, aspirations, and goals of a person. From there, design and build a plan that can make those come into fruition.
Planning for old age and retirement is not about fears, anxieties, worries or buying pension plans wantonly. It is all about the person and his comfortable, sustainable and peaceful future.
Rienzie Biolena is a Registered Financial Planner of RFP Philippines. He is a Senior Financial Advisor at asset management company, and Columnist of The Manila Times.
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