Almost everybody looks forward to their retirement days. You can finally live off the clock and enjoy the fruits of your labor while having the time to do the things you’ve always wanted to do, like seeing the world, taking a new hobby, or learning a new language.
But saying goodbye to your daily 9-5 job also means letting go of a steady paycheck and income flow. This means retirees need to be prudent about budgeting and spending their retirement fund to ensure it lasts them till the end of their sunset years.
How much do you need to retire in the Philippines?
First things first: how much should you have saved up before you can retire without worrying about your funds in the future?
A popular school of thought is that you need to have 25 times your annual expenses saved up. Basically, that’s how much you’re expected to spend for the next 25 years. This isn’t a hard and fast rule, though, as many factors affect how much you need to save.
Will you be retiring in the city or the province? You’ll obviously be spending more if you live in the city as compared to the province.
Will you be living in your current home or downsizing to a studio-sized condominium? Do you intend to travel frequently during your retirement years?
Keep these factors in mind when saving up for your retirement fund.
Be mindful of inflation
A scary reality that may happen during retirement is realizing you have not saved enough. This is partly due to inflation. There are many different causes of inflation, including lack of supply and reduction of value of the local currency. When inflation occurs, money loses its purchasing power, leading to an increase in the price of goods and services.
When saving for your retirement, make sure to account for 10% inflation as well. Think about expenses that may come up later in your life, such as added medical bills.
How to make your retirement fund last
To ensure your retirement fund lasts, you need to be mindful of how much you spend each year.
Try to aim to spend only 3% of your retirement fund each year so that it lasts the 25-year stretch.
Obviously, you won’t be spending money just once a year. So, you need to budget wisely. Once you’ve figured out how much 3% of your retirement fund is, create a budget and designate how much you can spend per category, like rent or housing, car, utilities, food, and investments.
Think beyond your savings
In addition to your savings, you should think about how you can supplement your money through other means.
A wise way to grow your money is by investing it. There are different investment products you can choose from depending on your risk appetite and tolerance.
It’s best to consult a financial advisor to find the best product for your needs and goals.
Don’t forget to enjoy
With all the computation, budgeting, and saving you’re doing, you might forget about something important–enjoying your retirement!
While it’s true you still need to be mindful of your expenses, that doesn’t mean you have to deprive yourself of fun. After all, you’ve worked so hard all your life, you’ve more than earned it!
Make sure you allot room in your budget for fun activities, such as vacations, dinners, and new activities–whatever brings you joy. Don’t forget to factor in daily expenses that make life better, like subscriptions and telco bills.
You’ve worked hard to save enough for your retirement years so we want to help you enjoy it as best as possible. Start investing with Metrobank so you can grow your capital the way you want it to.
