Money Advice for Future Lolos and Lolas: Retire On Your Own Terms

Aneth Ng-Lim

Posted at Sep 17 2018 08:43 AM

Philippine peso bills and coins. Gigie Cruz, ABS-CBN News

MANILA -- We all look forward to quitting the daily grind and retiring someday. And when grandparents were remembered in another commercial-filled holiday just this September, it can make anyone wonder just when that someday will come for us. For you, is it 10 years or 20 years from now? Or maybe when you turn 50, 55 or 60 years old?

In 2011, the Global Aging Institute designed the East Asia Retirement Survey to determine the attitudes, expectations and experience of workers and retirees in China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan towards retirement. A second wave was conducted in 2014 by the Canada-based firm to cover additional countries including Indonesia, Thailand, Vietnam, and thankfully the Philippines (as we have woefully little statistics on retirement).

These countries may be vastly different when it comes to per capita income, but the survey showed they have one thing in common: the role the extended family plays in caring for retirees. However, it looks like in the Philippines, that dependence was quite alarming.

We ranked first when it came to retirees who are financially dependent on their grown children with 40 percent. When respondents were asked if they expect their extended family to also provide personal care during their retirement, we ranked second to Vietnam with 63 percent. Quizzed if they were receiving or expect to receive income from investments during retirement, we scored the lowest among all countries with 3 percent and 8 percent.

As many as 71 percent of Filipino workers polled also expect to retire at 60 years old or later, placing us third from Hong Kong (75 percent) and South Korea (76 percent). Worse, 90 percent of our workers – we placed second to Vietnam – worry they will be poor and in need of money when they eventually retire.

While this four-year-old survey paints a dismal picture, you can still turn this around for your personal situation. Retire when you want, or as one worldwide best-selling book dares you to: Retire Rich and Happy. Of course, it can’t happen overnight, but the further your retirement date is, the better your chances of doing so in the style you deserve.

Here are seven steps to help your future Lolo or Lola self enjoy the best retired life.

1. DO THE MATH. The first thing you need is a roadmap that outlines Point A to Point B. You know where you are, and it really helps to plan where you want to end up. Do you plan to retire in the province where life is simpler and less expensive? Or do you expect to live close to your grown children who will likely stay in urban areas where cost of living is higher? Or maybe you dream to mostly travel which has a price tag all its own? Write down your plans and then do the math. Consider inflation too – remember, P1 million today will have a lot less value in 10 or 20 years.

2. START LIVING BELOW YOUR MEANS. Most people find it tough to live within their means, what more below the mark. It’s natural that when you work hard, you also want to reap the rewards so what’s the harm in getting the latest gadgets, or dressing in the best fashion? Well, you will pay the high price when you retire with little savings and hardly any investment. But assuming you followed #1 and did the math, you will now have a number in your mind to aim for. So maybe you can afford to travel 3x a year with your current income. Why not cut it down to 2 or 1 and set aside the money saved into long-term investments? Your retired self will thank you for it.

3. OWN YOUR HOME. One of the best investments you can make is to own your home, as this will provide you security in your golden years, and possibly a source of income too. While residential property prices are rising year after year, it is still a good time to buy. The Philippine housing market has not fully recovered from the crash after the 1997 Asian Financial Crisis. In current price terms, property values are back above 1997 levels but are still 20 percent below pre-Asian Financial Crisis levels in real, inflation-adjusted terms.

4. BUILD SOURCES OF PASSIVE INCOME. Inflation continues to accelerate but interest rates remain low so just saving will not help. The cash you hold now is losing value by the day, so you need to be more aggressive in making your money work hard for you. Research investment options, consider your time horizon and be honest about your risk appetite. Then sit down with a financial professional before you start an investment portfolio. If you do it right, you can count on passive income (money you make from investments) when your active income ends (what you make from working).

5. BEWARE OF SHORTCUTS. If it’s too good to be true, it likely is. Don’t be fooled by the promise of high interest rates or double your money offers. In this low interest market, no financial services company can deliver these in the short term. When it comes to money, don’t take advice only from relatives or friends (as they likely bought in and want to convince you too). Do your homework and talk to experts. When scams are discovered, more often than not, family and friends discover they all lost money together.

6. PROVIDE FOR YOUR FAMILY. Statistically, not all will reach their ripe old retirement age. It’s good to plan for yours, but also provide a safety net for your family in case you won’t be around. Surveys show that most Asians are underinsured, leaving debt and other financial obligations behind when the unexpected happens. At the minimum, provide enough funds so your children can finish college. If you have housing and car loans, consider mortgage protection so these loans will be paid off in case of accident or death.

7. PREPARE FOR THE WORST. Your monthly contributions to the Social Security System or the Government Service Insurance System will not be able to support you in retirement. The basic monthly pensions offered by these 2 agencies will not cover even half of the basic needs of a typical Filipino family, based on the "hypothetical" assumption released by the National Economic and Development Authority in June 2018. Now that you know, make sure that you have other income sources for your golden years. Assuming you work (and not an entrepreneur), study your employer pensions. If they have a "matching" program where you can increase benefits if you also contribute, sign up for it. Your personal savings will also help you prepare for the worst. Target to save at least 10 percent (better if 20 percent) of your monthly income and invest the pot when it grows.

With these seven steps, you can make sure you will not be dependent on your extended family financially and for personal care too, and instead just enjoy their company (allowing them to also just enjoy yours) in your golden years.

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.