How to retire with a pool of money
abs-cbnNEWS.com | 05/22/2009 12:48 AM
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Even if you're young and retirement seems like a far-off dream, experts say it's still good practice to save up for your future. In fact, the earlier you do so, the better.
Teng Alday, President of Citicorp Financial Services and Insurance Brokerage, said there are a multitude of reasons why young people should think ahead about retirement plans. The first being that it is good to have money to pursue any interests when one has all that free time.
"When you're about to retire, you would want to do what you've always wanted to do. Some want to travel, some want to move outside of the city into a resort community away from the hustle and bustle. While some want to contribute their time to the community. And that may be difficult if you cannot support the lifestyle you want at retirement," she said.
Not having money could even force people to work past their retirement age or depend on their adult children for income.
Another more compelling reason to save up for retirement is longevity and whole lot of time to contend with. According to Tenggay Santos, Manulife financial advisor and a Million Dollar Round Table member, life expentancies around the world are increasing, giving another reason to save up for the future.
Santos said that, based on writings by psychologist Dr. Ken Dychtwald, baby boomers do not want to retire but would rather reinvent themselves. Adulthood increasingly consists of leisure time being squeezed in between education and work, and retirement is being redefined as a time for reinvention and freedom. "People need a financial plan to do all these," she said.
Save smart
The decision on how much to save for a retirement plan, meanwhile, is based on a person's goals and lifestyle.
"There is no one-size fits all answer. Write down your aspirations--to travel, to own a second home, provide for your children-- and put a peso value to each one. Then consider the inflation from this year to your retirement year and include that in your estimate," Alday said.
"Look at how much you will need to set aside starting today to meet that goal," she said. There are free no-obligation financial planning sessions offered by groups like Citibank, she added.
Santos, meanwhile, said it is good practice not to put your money in just one place, and to make sure that the financial institution can be trusted. "Diversify your funds. Study the company and its background. Don't go blindly into an investment just because your friend says it's good to do so," she said.
She also gave a warning: "If it's high yield, it's high risk. Beware of investment scams offering an unbelievable rate of return."
There are various ways you can save. The menu of financial products include less risky ones, like good old bank deposits, life insurance plans (guarantees a sum of money to your beneficiaries in case something happens to you and provides benefits if you outlive the plan's term period), pension plans or mutual funds (pool your and others' money, which are invested to grow until you reach retirement).
Other products, like shares of stocks and bonds, could be traded daily or held for long-term. While these usually give higher returns than your time deposits in the bank, make sure you have the stomach to ride the daily price fluctuations. Report by Karen Galarpe, METRO Magazine.
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