Last week I talked about the Hedonic Tilt and that people’s spending decline as we age assuming we shed a lot of responsibilities and payments (children are all grown up, fully paid mortgage..etc). This particular point is hard to believe as not only the media but also the financial industry tends to go the opposite direction. But just like in investing, people tend to speculate about retirement lifestyles too.
Ever since I became aware and be part of the world of personal finance, I’ve lost count at the articles, press releases, surveys, summits and seminars that tell us we will all suffer deprivation when we retire. Although the Philippines still lack an institutionalized form of personal finance education, and an equivalent working 401k for the masses, our government is working towards that direction currently.
I, too, believed in such dire retirement crisis once upon a time, but as I learned more about the financial industry and also about people’s spending habits, I now tend to believe that it really isn’t much as compared to those so called impending crisis or problems that can be fixed with common sense solutions.
The power of awareness
The problems retirees face such as medical expenses, low pension, and unpaid debt are very much preventable. We can use the 3 legged stool of retirement as an analysis:
• Social Security. We had headlines last year that SSS would go bankrupt in 20XX. This is beyond our control but we can bring the matter to our politicians so they can act on the problem. Speculation can easily make people optimistic or fearful.
• Employer pensions/provident fund. If you are employed and will work on a long term basis, then this is a wonderful company benefit but freelancers, self-employed and MSMEs will not get this perk. And even if your company provides this, you still have no idea if they are managing the fund properly. But you do have the option to create your own retirement fund, the power is in your hands — you just have to decide and then do it.
• Personal savings. All of us are definitely capable of saving given the right type or amount of motivation. It could be travel, a gadget or something, but for things like retirement, well you can automate savings these days. In short, we have more options today compared to let’s say 10 years ago. And the good old habit building will never fail you.
We can include inflation as a factor too but that’s always there and retirees have a great deal of control over their standard of living as they shed responsibilities, shift priorities and change lifestyles.
I believe that retirees can definitely live a comfortable life in the Philippines, assuming that they are no longer taking care of their adult children but if they are, that’s more of a parenting issue.
The so-called retirement crisis is greatly exaggerated. However, that doesn't mean you should be complacent. Still, don't forget to put a little money away for your later years. It's better to be safe than sorry.
The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
Originally Published in Philstar - The Freeman Newspaper last November 22, 2016.