RETIREMENT PLANNING

Retirement Planning is something that many people routinely put off until later in their lives.  People in their 20s, 30s and even 40s see retirement as something that's looming very far into the horizon.  "There's a lot of time for that", many would say.  "65 is still a long way off from where I am today", others reason out.

But in retirement planning, time is considered the most powerful ally.  The earlier you decide to start to plan for your retirement, the greater the chances that you will be able to accumulate a stash of cash that would adequately cover your retirement needs and wants.

But you'd ask, what are the needs of a retiree?  Aren't retirees supposed to be just sitting on their living room couches and watching the TV or listening to the radio all day?  

You'd be surprised to realize that most of the things you spend on today will still be needed during retirement.  Let's list down the the typical expenses of a retiree.

• food and groceries
• utilities (water, electricity)
• salary for the help
• gasoline and other transportation expenses
• association dues and other fixed expenses
• medical and other health expenses
• real property taxes (for those with lots of properties)
• credit card payments
• miscellaneous expenses

As you can see, life doesn't stop during retirement.  But your income and earnings have stopped. Aha! So there is a need for retirement planning simply because during retirement, your EARNING POWER HAS ALREADY ENDED but your EXPENSES CONTINUE.

And when retirement time comes, the abovementioned expenses would probably have tripled or grown exponentially from their current levels today.  Chances are, you won't be able to adequately meet these expenses even if you regularly place your money in a savings account that earns for you 0.5% to 1% per year.  

Chances are, you won't even be able to adequately meet these expenses even if you rely on your SSS, GSIS or PAG-IBIG pensions.

You have to do more!  Apart from saving, you need to INVEST as early as possible so that your money can grow and compound throughout your productive years so that it will become a formidable stash on your 65th birthday.

And why should you start as early as possible?  Let's take a look at the Stages of our Economic Life for clues as to why retirement planning ought to start as soon as you get your first paycheck. 

THE STAGES OF OUR ECONOMIC LIFE

We all have approximately 45 productive years to grow our money and adequately fund our retirement needs. Are you sure you're making good use of your 45 years?

As you can see, our economic life is divided into three major stages:

• Learning Stage - from pre-school (starting age 3) to last year of college (from 20 years to 23 years old).  This stage in our life is spent picking up all the knowledge and wisdom available in school and then honing our cognitive, emotional and physical skills toward the area of competence where we feel we are destined to excel in.  Upon graduation, we enter the "game" of economic life, hence it is called "Game On".

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• Productive and Wealth-Creating Stage - this stage normally takes place in a span of about 45 years.  This is typically the longest stage of our economic life.  This is where we apply all our learnings and practice them in the real world marketplace.  In the process of practicing our profession and performing our jobs, we are compensated and paid for the services we render. In turn, we try to keep and save as much of the money while at the same time, trying to meet all the expenses that our lifestyles require. Upon reaching the age of 65, most of us retire and quit the "earning game".  At this age, most of us encounter our "Game Over" point.

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• Retirement Stage - this is the stage where our earning power has already stopped but our expenses do not.  This is the stage where we need to rely on the cash stash that we have accumulated during our productive years for our daily and monthly needs, as well as special needs like medical care needs that usually crop up during this time.

The light green line that slowly and steadily grows throughout the Productive and Wealth Creating Stage represents the typical trajectory of the value of the money that people save and invest during this stage.  It starts off really slowly during the first few years, normally only gaining momentum during the latter years when investments have already compounded.

Notice below what happens when retirement planning is postponed by 10 years.  If an individual decides to start saving and investing for retirement at age 30 instead of age 20, the accumulated retirement funds he amasses would only reach Point B on the "Game Over" line, considerably less than Point A, which was the point achieved by someone who started saving and investing a decade earlier. 

"Someone is sitting in the shade today because someone planted a tree a long time ago" 
~ Warren Buffett,
   Legendary American Investor 
   Chairman and CEO, Berkshire Hathaway

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Sun Life Plan for
Retirement!

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YOUR PARTNER :

Office Address:
Baobab New Business Office
Sun Life Financial
6/F BTTC Centre,
288 Ortigas Avenue
Greenhills, San Juan City
Philippines
Tel. No. 7-719-3958
Fax. No.7-719-3894

Edwin T. Bartolome
Financial Advisor and Certified Investment Solicitor
Authorized by the Insurance Commission to act as an Insurance Agent.
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For inquiries and free assistance on Personal Finance, Investments, Estate Planning and other Money Matters, you can reach him at:

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Financial Planning Articles:

Why You Need To Maintain Both A Savings Account and an Investing Account

Why Filipinos Should Invest and Not Merely Save

Getting Rich Is Like Running A Marathon, Not A Sprint

Delay Your Gratification To Succeed Financially

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Start saving and investing early, and you will surely reap the rewards.

From the graph above, you see the value of time and what more of it can do to increase your money.  So you have do to something about your retirement plans NOW.  Do not wait when retirement is staring you at your face.

You owe it to yourself and to your family.

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