Who says you can only retire at 65?
MANILA, Philippines - Retiring at an early age is perhaps every working man’s dream.
Under Philippine laws, the compulsory retirement age is 65, but some companies have set the clock to age 60. Instead of waiting until you are 65, or 60 depending on the company you work for, why not shave several years off and retire at the age of 55 or 50?
At this time, you still have the strength and the wits to give your wildest dreams a chase. If you wait until 65, you might already have incurred a couple of health conditions that may hinder you from fully enjoying the fruits of your labor.
Exactly how much money will you need to put away?
There are a number of retirement calculators online to help you arrive at your magic number. But if you want to keep things simple, you may just do the following: Multiply 80 percent of your pre-retirement income to the number of years you expect to live after 50. This is the common advise found in most personal finance books, and a good rule of thumb to get you started.
Now that you’ve got your magic number, you will need to do some serious planning matched by strong willpower to get to your goal of retiring by 50. Here are some ideas that may help you along:
Save now! Saving up for retirement is one of the easiest things to put off because it seems so far away. But given your “Retire by 50” deadline, you’ll be more motivated to get a move on. Besides, saving now means you will enjoy the full benefits of compounding interest.
Follow your money trail. There are two ways for you to save: you either cut back on your expenses or pump up your earnings.
The first, though seemingly simple, requires a strong sense of discipline and some good old fashioned common sense thinking. Think twice, for example, about incurring recurring expenses. If you become a member of a fitness club, you are not only enrolling yourself in a bunch of Zumba or yoga classes, you are also buying into a whole new lifestyle. You’ll need to dress a certain way, get a health juice after your workout, and pay for parking. That’s quite an investment so think hard before you commit.
Earning more, on the other hand, requires creativity, ingenuity, and a whole lot of hard work. Apart from doing weekend work using your skills and talent, consider introducing a product or service that addresses a personal concern. This is exactly how the mompreneur phenomenon came about.
Women started making products that answered their own concerns because traditional manufacturers weren’t making them such as clothes for breastfeeding mothers, and special detergent for baby clothes. A lot of fortunes have been made this way.
Invest time to make more money. If you want to make your money work hard for you, you have got to know the ins and outs of investment. Read books on personal finance. Scour the internet for credible and helpful sites. You might find the language hard to understand at first, but in time, you will be able to have a good grasp of the industry.
Check out and sign up for money workshops — and make sure you get your money’s worth by asking the resource speakers all your burning questions. It may also be a good idea to seek the services of a financial advisor who can give more critical insights.
Analyze different retirement plans. There are several financial products available in the market that can be tailored as a retirement plan, with a menu of benefits thrown in including life insurance and hospitalization coverage.
In 2008, the Personal Equity and Retirement Account (PERA) was signed into law. A voluntary retirement account, PERA contributions are invested in “eligible/qualified” investment instruments including shares of stock in mutual funds, annuity contracts, insurance pension products, shares of stock or other securities listed and traded in the local stock exchange, exchange-traded bond, and government securities.
PERA contributors enjoy tax exemption privileges from the earnings of all PERA investments. However, PERA only accepts a maximum contribution of P100,000 (for Filipinos living in the country) and P200,000 (for overseas Filipinos). Go over the details of these plans with a critical eye before deciding which one is right for you.
An investment portfolio with a good mix of stocks, bonds, and other assets is ideal. Real estate, especially those that generate rental income, is another option worth looking into as time is on your side.
If you prefer the stock market, make sure you stay in the game. Don’t be tempted to pull out when you take a hit. Be patient, be discriminating, and you’ll reap the rewards soon enough. Be on your toes always. Analyze the risks and growth rates of your investment portfolio on a regular basis.
When you’re younger, you might go for higher risk investments with a better rate of return. After all, you would still have time to recover should the market play tricks on you. As the years wear on, however, you would have to take on a more conservative tack. You wouldn’t want to risk your money as your retirement date nears.
Put together, these strategies would help you achieve your goal of retiring at 50. Even if you don’t reach your magic number by your deadline, don’t get frustrated. Saving for retirement never hurt anybody—and you’ll still be ahead of everybody else!
Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.
Visit www.citibank.com.ph for more information.