When we talk about retirement, what picture do you instantly have in mind? Some would probably say:
- A stage of life to look forward to.
- A time of despair.
- No clear picture of what to expect.
People have both positive and negative thoughts about retirement. Those people who see their retirement as a stage of their life that they are excited about would have had prepared for their retirement years. And those who have negative thoughts about it may not have considered planning for their retirement or may have become unaware on how to prepare for retirement. Where are you at this point in your life?
I fear to be incapable of helping my children or even myself when I reach retirement. Years ago, planning on retirement never crossed my mind. Probably brought about having a young mind where everything that matters was just the “now”, I was a typical Filipino who has this “bahala na” attitude. Some would even say, “bahala na si Batman”.
But to just let things happen without doing anything to make life better is a huge mistake.
You see so many people by the street- either peddling candies, cigarettes or even illegal substances, lying by the sidewalk, gambling on a street corner….. what is waiting for them in the future? If they remain to be this way for the next five years, then most likely, nothing good would happen in the future for them unless some kind of luck befalls them. But how likely is that to happen?
As soon as we step out of college, we start to become responsible for our own lives. Even if we have very supportive parents, it does not make an excuse not to think of our own future. How much do you earn in a month? What percentage of your income do you set aside for your savings? Financial planners recommend that you save at least 10-15% of your income as early as in your 20’s.
It pays off to establish a savings target that can tell you roughly just how much you should set aside to meet your retirement goals. Try to avert as much of your earnings into savings. Start making a budget so you can reflect on your goal of having a strong commitment to saving. This would also help you make changes in your spending habit. You might start by ditching expensive meals or buying luxurious items.
If you think that you are still young and can’t save enough right now, don’t be disheartened. You will go through several stages wherein your income will probably grow as your career progresses. This would then allow you to save more. Some ways that can help boost your savings rate is by saving up your bonus or inheritance.
Change is inevitable in all circumstances. And doing a little tweaking on how you change your standard of living can help you so much. If you plan to travel the world when you retire, this would entail a huge amount of money. But, that should not deter you from exploring new places. Swap it into a more appropriate spending like a Caribbean cruise, perhaps? This will help you lower your retirement target into a more attainable goal.
One more thing that can help you is by delaying your retirement date. Allowing yourself to work a few more years can add up for your savings. It will allow your savings more time to grow. But I don’t blame those who seek early retirement. They have their own personal reasons to do so. I am only suggesting that when an individual considers working a little longer than the rest, for sure, he can save more for his retirement needs.
Some people at a retiring age still consider working part-time. And for as long as their health permits them, I guess it is fine. But, also, due to their advanced age, health problems may prevent them from it. Also, finding an employer who wants to hire individuals in your senior years would not allow you to receive the amount of money that you wish to have. Therefore, there is a need for you to plan your retirement wisely so you would not need to work beyond 70 years old.
Start young. Build a giant nest early on. Remember that compound interest can do so much. Imagine yourself in this situation. If you have a savings of Php 200,000.00 by the time you reach 45 years old and you continue to save at least Php2,000 a month, you’ll have Php560,000 when you reach 60 years old. With the retirement plan, you have created, is the amount enough for you? Probably not. Therefore, it is up to you how much persistence you will have in order to attain your goal.
What of the things that pull down an individual is when he commits himself to a line of debts – house and car mortgage and other things which the credit card has tempted you to purchase. Not unless you realize to prioritize the most important things, it may be difficult for you to even reach Php100,000 in savings with so many monthly payments to make.
This one is extremely important. Take at least 5% of your monthly income for emergency purposes. Accidents happen without us knowing, of course. And these are unexpected expenses that we should come prepared for.
Not Having Enough Time?
Employees should never fail to pay their monthly contributions to the Social Security System (SSS). If you have not been employed for the past years, but would want to receive a pension, consider paying as a voluntary member. This is called a catch-up contribution. Do everything you can to take advantage of this opportunities to save more. You may increase your contribution in order for you to receive a higher monthly pension. Currently, the highest contribution is Php1760.00.
Make A Withdrawal Plan
We mostly talk about saving up for your retirement, but we have not mentioned how to access it. What you will need is to have a systematic withdrawal approach. For instance, with a time-based breakdown approach, you divide your assets into several vessels based on when you will be needing the money: easy to access accounts, money market accounts for the next, say 1-5 years, low-risk bonds for the next 6-15 years, and then more assertive stocks for 15 years or more.
To make things much easier, seek for a financial planner that will explain how your retirement income will be properly structured, identify the possible risks, and what steps to make in order to be rebalanced in the years to come to help you prepare for your retirement.