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Retirement: The Employee’s Perspective

My biggest apprehension in writing about retirement is how to make it relevant for the reader, especially if the reader is 30 to 40 years away from retirement – if you are a millennial reading this, you probably don’t even have your weekend plans straightened out, let alone have your retirement plan ready.  In contrast, most if not all of the attendees of the retirement seminar I conduct would unanimously agree that every new employee should learn the things that I teach them because it the attendees think it will change the perspective of their younger colleagues about planning for retirement.

If you are in your mid-20’s or early 30’s, retirement is just too far away for you to think about let alone plan for.  But did you know that the best time to actually put something aside for your retirement is when you receive your first pay check? That being said, I would like to differentiate putting money aside for retirement, versus planning for retirement.  The former is something you start as early as possible, the latter you can do when you have experienced life and what is has to offer – which is so much more complex than simply putting aside money.

Just to get it out of the way, here are just a few questions I ask retirees before helping them create a plan:

  1. How much is your net worth?
  2. How much is you monthly cash inflow?
  3. How much is your monthly expense?
  4. Where will you live (urban and rural living can have a big impact on cashflow)?

Pretty obvious that those questions are not for your typical millennial. Again, 30 to 40 years is too far away and a lot could change during that time. What is not going to change is the fact that you will eventually have to stop working and live off the retirement money you are able to put aside. And here are three things you can do to build your retirement fund:

Start Early. 

Starting early is not so much about the amount but the discipline of putting money aside.  You can start with the smallest amount possible.  Today you can create a savings account for as low as Php 500 – start with that and build it up later on.  In building your retirement fund, time is you best ally. The sooner you start the more time your money has to grow.  Take for example this chart, it shows how much a Php1,000 is going to be worth at age 60 if you start investing in the stock market given your age (e.g. if you start investing Php 1,000 a month until age 60, it will be worth Php 15-M by then).

Table 1: Php 1,000 monthly investment in the stock market earning 12% per year (based on historical return).

Another, advantage of starting early is establishing that discipline that you can carry with you when you start earning more.  Which brings me to my next tip.

Make it Regular.

Regularly putting money aside is the best way to make sure that you can build your retirement fund.  Make it a part of your regular expense.  Think of this expense for your future self.  And believe me, your future self will thank you for it.  Investments first, just start with the discipline of setting money aside, preferably in an account that you can’t even touch on a regular basis.

Check and Balance.

By following the first two tips, you will be able to put aside money already.  Assuming you start working when you’re 22 years old and you just put aside Php 1,000 a month, on your savings account, that will be at least Php 60,000 in five years. This amount can now be your starting fund for an investment account.  I won’t bore you with the details but if you start with Php60,000 at age 27, and put aside Php 1,700 a month, base on the same computation in the chart above, you will have Php 15-Million on your retirement fund by age 65. But I’m sure you won’t just have Php 1,700 a  month to save.  And that is the value of checking where you are on a regular basis and adjusting you monthly savings as you go along. Doing so will ensure that you will end up with so much more than Php 15-Million pesos.

Retirement will vary from one person to another. My father said that life is too short to retire doing nothing, and I will likely be that person that will be busy with a lot of things when I retire.  The difference is choice.  And having a retirement fund gives you that choice. Choice of things to do, places to go, and people to see. My question for you is what kind of retirement do you want to have and how much will you set aside to get that – to have that choice?

If you want to know more about saving, feel free to check out Bridge Access or send us an email at access@bridgesoutheast.com.

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