When it comes to retirement issues, Philippines is one of the most insecure countries in the world. 9 out of 10 Filipino workers were anxious about how to stretch their income in order to cover their daily expenses upon retirement when they have insufficient savings and perceived low support from the government. Their anxiety is reasonable as planning for the future can be daunting.
You need to go over your budget, understand various financial products, and determine your dependents. To fill in the gaps of personal knowledge, many Filipinos rely on myths about retirement.
These are some of the common myths that you shall debunk:
Retirement Myth #1: There Is A Certain Percentage Of Money Needed For Your Retirement Fund.
Some financial “experts” or gurus have set a fixed standard regarding the percentage of income necessary for one’s retirement. According to most of them, you will need to have 80% of your current salary to fully suffice your retirement expenses. This is absolutely exaggerated and overly generalized!
Truth Spell: The amount of your retirement fund depends on your pre-retirement and post-retirement lifestyle choices. For example, retiring in a humble province in the Philippines will cost you less than retiring in a bustling city in Australia. And if you choose to travel frequently during your retirement then, you will need to allocate a significant portion of your fund for it.
Retirement Myth #2: Retirement Happens When You Reach Age 65.
Believing that 65 is the riveting age for retirement can harm your finances in many ways. First, you are limiting your capabilities. You are following the majority and retiring at the “acceptable” age instead of working and earning beyond that. Second, you may be slacking on growing your retirement fund. You ignore investments and other potential streams of wealth which are offered to you in your 30s.
Truth Spell: Retirement happens when you attained financial independence. Do not enclose your walls with a “magic number” and regret planning too late.
Read more about Financial Independence, here.
Having enough savings in your bank account can solely build your elderly nest. This is one of the longstanding misconceptions that Filipinos possess. The interest rates in savings accounts are so minute that keeping your wealth under a pillow can almost do the trick!
Truth Spell: Saving accounts are not considered as investments. Investments must relatively conquer the inflation and must maintain an interest rate of 1%. In fact, according to the data available online, PSBank Savings Account offers the highest interest rate of merely 0.50%. This is followed by BPI Business Savings Account (0.35%) and Banco De Oro Savings Account (0.25%).
If you want to maximize your wealth, you must find ways to cultivate it in viable terms.
Retirement Myth #4: Real Estate Is The Best Investment For Retirement.
Several Filipinos (especially OFWs) believe that properties are the best form of investment for retirement because it always increases in value and it provides you with a tangible asset. However, this scenario does not apply to everyone.
Some people may experience property depreciation due to several factors such as being located in an area which is prone to heavy flooding. People are more hesitant to purchase or stay in a place like that.
Truth Spell: Real estate is one of the “riskier” investments as it entails a myriad of expenses and it is subjected to relatively long price movement cycles. The expenses that I am referring to are taxes, dues, maintenance costs, and so on. Unless your property is income-generating, you can own the investment for a long period of time before you can make money out of it.
Retirement Myth #5: You Will Not Spend Too Much Once You Retire.
Imagine yourself after retirement. You can finally say goodbye to beating the crowd during rush hours as well as to the hefty lunches at the CBD (Central Business District) areas. You will probably go back to the Philippines to enjoy a relaxing lifestyle too. You think that retirement can mean saving hundreds or even thousands of money.
Truth Spell: Retirement is more than just staying at home with your grandchildren. It allows you to do the things that you previously cannot attend to due to budget and time constraints. Simply put, it is a weekend that never ends! You can play badminton whenever you want or travel to the lush greeneries of Africa. These leisure activities equates to more expenses.
Then you have to add up the medical bills. It is inevitable to have a weaker body and more hospital visits when you are getting older. A good insurance plan, Australia’s Medicare or Philippines’ PhilHealth helps you lower the costs, but it does not eliminate the medical bills completely.
In conclusion, there are several retirement myths that are present in the mindsets of the Filipino people. There is no magical age and percentage needed for retirement. Your experience is unique due to our individual differences in personality and spending habits.
Also, financial security is not limited to your savings account and real estate investments. There are other streams of income such as mutual funds and stocks. Lastly, retirement does not necessarily lead to a cheaper lifestyle. Your health will eventually deteriorate unless you indulge in the fountain of youth.
These retirement myths are damaging to your finances primarily because it leads to inaction. Taking an active role in your retirement planning will help you beat these myths!