Boosting your retirement money beyond the monthly SSS pension

 

The monthly pension a retiree receives from the Social Security System (SSS) serves as an extended financial assistance, but it is not meant to be the total retirement fund.

The highest SSS monthly pension is around 13,000. The lowest is P1,200.

That's why it is best for Filipinos to look for multiple income streams to fund their retirement. Here are three income supplements to an SSS pension:

Savings account

The greatest benefit of savings account is liquidity – the measure of the amount of cash a person or an organization has to meet short-term obligations. Simply put,

It’s a gauge of how easy an entity can convert its assets into cash. Unlike real estate where it can take years to sell a property and make money, a savings or checking account provides outright cash. That means it is being highly liquid.

It is important that when the time to retire has come, Filipinos have a well-padded savings account to meet immediate and emergency expenses. However, too much of everything can also be bad. It is suggested to only store around 6 months’ worth of living expenses in highly liquid accounts.

If the bulk of your money is in liquid investments, you run the risk of losing money due to inflation since Philippine savings accounts only provide an annual return between 0.25 and 1 percent.

Real estate properties

Filipinos prefer to invest in real estate than stocks and bonds. Seventy percent of Filipinos own their homes, according to a Bangko Sentral ng Pilipinas survey.

Real estate is an income-generating asset, as it can be a source of rental income, buy-and-sell revenues, and long-term investment yield.

Since real estate is a big-ticket item, earnings from rent and sales can be a good source of income when you retire. Compared to the P13,000 monthly pension limit, earnings from real estate can easily surpass that amount.

Paper assets

Many Filipinos do not leverage the potential income from paper assets.

As of 2014, there were only 640,645 investor accounts on the Philippine Stock Exchange, said Atty. Roel Refran, PSE chief operating officer. 

Paper assets include stocks and bonds, and these are some of the best ways to reach one’s retirement goals. Unlike the limited returns of a savings account at 1% or less a year, the return on investment (ROI) from paper assets can vary from 3 percent (low-risk bonds) to as high as 40 percent or more (higher-risk investments such as stocks).

The higher yield rates enable investors to beat inflation and grow their net worth at a faster pace.

However, it’s best to note that the most profitable investments pose higher risks, and investing blindly can lead to losses.

It’s also worth noting that stocks and similar investments are best for the long-term, which make them ideal for stashing away your retirement funds.

Marvin Germo, author of the Stock Smarts series of books, advises investors to “never invest money they cannot afford to lose” because investments are not guaranteed. While this is the case, you can reap high returns if you make informed investments based on data and situational analysis.

To maximize your retirement fund, it’s best to leave your money in investments for a minimum of 5 years without touching it until you retire. This allows you to ride out any market fluctuations and keep growing your money over the long term.

Retirement fund

People look forward to retiring because that’s the perfect time to pursue their hobbies and simply enjoy life. Retirement is when you have free time at your disposal. But with more free time, you run the risk of spending more, and so you need a healthy retirement fund.

Such fund allows retirees to live their dreams, whether it’s retiring on a beach or enjoying daily lunches with amigas at the nearby mall. With the P13,000 monthly pension limit, that can be difficult. So it’s important to start saving and investing early on using the three alternatives above.

On January 14, 2016, President Benigno Aquino III released a veto message in response to House Bill No. 5842 which proposed a P2,000 across-the-board increase in the monthly pension of SSS members.

Around 2 million Filipino pensioners would have benefitted from this bill if the President had signed it into law.

The P2,000 hike will be beneficial to pensioners but even the highest monthly pension won’t serve as a sustainable retirement fund if you take into consideration the inflation rate.

However, a P2,000 increase will cut the fund life of the SSS by 13 years, according to the pension fund for private sector employees.

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This article is an updated version of a post at MoneyMax.ph.