First Stage: Aggressive Wealth Accumulation And Growth
Theres not much pressure yet because youre just starting to save money for retirement.
However, your biggest advantage as a young adult is the time you have to grow your money before you retire.
Thats the power of compound interestwhat you invest today will grow exponentially over time. The earlier you invest , the higher retirement youll accumulate.
So focus on saving and investing as much as you can. The first stage of retirement planning is the best time to invest aggressively in long-term, medium-risk to high-risk instruments like mutual funds, real estate, and stocks.
How Much Can I Earn From A Pera Investment
The earnings you will receive from a PERA investment depends on the choice of investments. Different products have different returns, so when you invest into something that has potential for higher returns your investment has a higher risk. On the other hand, modest risks usually means modest returns.
The Benefits Of Phased Retirement
Todays workforce is in a state of flux because there are more generations working right now than ever before. We have Gen Z making their workforce entrance, Millennials settling in, Gen X entering upper management, and Baby Boomers making their exit.
This presents a few problems, namely that Baby Boomers are hitting retirement age en masse. Theres a commonly stated stat that proclaims that about 10,000 Baby Boomers hit retirement age every day in the US. That means that they are now eligible for retirement.
Despite the fact that retirement is changing – Boomers are working far longer than other generations who reach retirement age – the fact remains that Boomers are starting to make a big exit from the workforce, taking a lot of their skills, knowledge, and proven leadership skills with them.
So, in order to curb the negative effects of the this sudden exit, human resources needs to find a way to transfer all of those skills to Gen Xers and Millennials who will be filling in the role. Phased retirement can seriously help with this because it allows the retiree to slowly reduce their workload while teaching those who will remain.
Knowledge transfer can keep a business rolling through all of these transitions. It also helps deal with a side of retirement that we typically ignore.
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Pera Investment Account Requirements
BDO PERA Account Opening Requirements:
- BDO savings or current account
- Tax Identification Number
- Have completed the BDO PERA Seminar
- Copy of latest Income Tax Return on hand as reference for the following: Employers TIN
BPI PERA Account Opening Requirements:
- BPI savings or checking account
- One valid ID
- Copy of latest Income Tax Return or any document that can validate the TIN.
- PHP 1,000 as an initial investment
Additional requirements for OFWS:
- Overseas Employment Certificate issued by the Philippine Overseas Employment Administration
- Any official document showing that the OFW will earn or has earned income in a foreign country in the year of the PERA contribution
PERA Opening Requirements for OFWs:
If youre an OFW, your spouse or child in the Philippines can open a PERA account on your behalf. Your representative must submit the following documents:
- Sworn certification that the spouse or child is opening a PERA for the OFW who has not availed of the benefits under the PERA law
- Overseas Employment Certificate
- Any official document that proves the OFWs income from a foreign country
What Is Retirement Planning
Retirement planning refers to planning and managing your finances to prepare for life after you stop earning income. It involves determining how much money you need when you retire and how youll achieve that goal through savings and investments.
Why make a retirement plan at a young age? Because life is uncertain.
Youll never know how long youll live and whether or not you have enough funds to sustain your lifestyle when you retire. Planning for retirement minimizes that risk.
To plan your retirement properly, you have to consider not just the financial but all aspects of life in your golden years:
- Your desired retirement age
- How youll manage and protect your assets before and after death
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How Much Money Should You Save Each Month For Retirement
Financial experts recommend saving 10% to 15% of your income for retirement, starting in your early 20s.
Thats the ideal scenario. However, not everyone begins building their retirement fund at age 20.
If you start in your 40s or 50s, saving only 10% of your income will never be enough because you have little time left to save until your retirement years. The percentage of retirement savings must be higher when you start later in life.
To meet your retirement goal, youll have to save 24% of your income when you start at age 40 or almost 50% if you start at age 50.
For an easier computation, use MSN Moneys online retirement savings calculator.
Lets say youre 25 years old and earning Php 25,000 monthly. Youre expecting to retire by 60 and live until 70 .
Experts peg the annual income after retirement to be at 70% to 80% of ones current annual income.
With a yearly income of Php 240,000 and an investment return of 5%, youll need to set aside at least Php 20,518 per year .
Problems You Will Have To Solve With Phased Retirement
While phased retirement offers a slew of positives for your business, there are quite a few downsides that your plan will have to address if you want it to be successful. Many of these downsides occur because of how employees are paid when they retire.
The first issue is how pension plans typically operate.
Most pension plans require workers to work a certain amount of time or get paid a certain amount of salary during the years up to their exit. With a phased plan, those hours would ramp down towards the end of someones career, possibly impacting how much they will make from their pension plan.
Before signing on, those enrolled in a defined benefit plan especially workers in public sector jobs where defined benefit plans are the norm should investigate how a reduced salary for the last few years of employment will affect their pension calculation, reports Christina Couch from Bankrate.
If reducing working hours will also lower your pension earnings, an alternative option is to quit your current job, begin taking your full pension earnings, then return to the company as a part-time employee or independent contractor.
The same problem can happen with healthcare benefits, profit sharing incentives, and social security benefits.
They sum it up succinctly: you need a plan to works both legally and is flexible enough to ensure that your staff to utilize the program without jeopardizing all of the other benefits they have accrued.
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Who Can Create A Pera Account
Filipinos here and abroad aged 18 and above with a Tax Identification Number , whether employed or self-employed, may open a PERA account. Below is the basic eligibility criteria and requirements:
- At least 18 years of old
- Has a source of income in the country or abroad
- Tax Identification Number
- Current or savings account from a PERA administrator bank
- Valid IDs
- Latest copy of Income Tax Return
Funding Ratio Improved Peras Financial Health Got Worse
Oddly, PERAs funding ratio a common measure of a pensions finances actually improved, even as its debts got worse. PERA now has 62.8% of the assets needed to pay off future benefits owed, up from 61.9% in 2019.
But the projected time needed to pay off PERAs debts got worse. At current funding levels, it would now take 43 years for the school division to reach 100% funding, and 33 years for the state. Both are outside the 30-year window required by state law and recommended by government accounting experts.
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El Paso County Retirement Plan
Mission: Provide secure and competitive retirement benefits through a professionally managed organization. Deliver quality service and communication to employers, members, retirees, beneficiaries and the public.
Executive Director: Greg Kuppenheimer
9:00 a.m. 3:00 p.m. Mon-FriClosed County Holidays
2880 International Cr., Suite N030Colorado Springs, CO 80910
When can I retire?
Normal Retirement provides full benefits at Age 62 with any number of years of creditable service.
Special Early Retirement provides full benefits prior to age 62 when you meet the Rule of 75. The Rule of 75 is met when your age plus the number of years of creditable service total 75. If hired after December 31, 2015, you must be at least age 50 to qualify for this retirement option.
Regular Early Retirement A reduced benefit is available at age 55 if you have at least 5 years of creditable service, if hired before January 1, 2013, or 8 years if hired after December 31, 2012. If you elect to start receiving a monthly benefit, the benefit is reduced 3% for each year you are under age 62.
Go to When You Can Retire for more details.
How is my benefit calculated?
The El Paso County Retirement Plan is a traditional Defined Benefit Retirement Plan and calculates benefits using a predefined formula. We start with a Final Average Monthly Compensation , which is the average of highest consecutive 36 months of salary out of the last 120 months of employment. The rest of the formula is as follows:
Unit Investment Trust Fund
Similar to a mutual fund, UITF is a pool of investments with funds from different investors. A professional fund manager also handles the investment of your behalf. UITFs are usually invested in money market funds, equity, or balanced funds. This type of retirement fund is offered by banks and is regulated by the BSP.
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Investment In Retirement Savings Up
THE Bangko Sentral ng Pilipinas reported on December 16 that the value of contributions in the Personal Equity and Retirement Account hit P237 million in September this year, up 62 percent from the P144 million recorded in the same month last year.
In a statement, the Central Bank attributed the increase to the promotion of the retirement savings program for Filipino families, especially those working abroad.
We continue to actively promote financial security and encourage more Filipinos to plan for retirement and set aside funds for their sunset years through PERA, BSP Governor Benjamin E. Diokno was quoted in the statement as saying.
As of the third quarter of the year, there were a total of 4,001 PERA contributors. Contribution from full-time employees comprised 70 percent of the total at 2,827, followed by self-employed individuals at 15 percent of 590 individuals. Overseas Filipino Workers also comprised around 15 percent of PERA contributors.
PERA is a voluntary retirement savings program created under Republic Act 9505 . This platform supplements existing retirement benefits from the Social Security System, Government Service Insurance System, and private employers. Anyone with a Tax Identification Number can be a PERA contributor.
Among the benefits of the PERA include a 5-percent income tax credit on the PERA contribution that can be used to pay income-tax liabilities. OFWs can claim this tax credit against any internal revenue tax liability in the country.
Save Up For Emergencies
Dont forget to build your emergency fund as well! It really helps to have at least six months worth of your living expenses in a savings account or time deposit.
This way, you wont be tempted to withdraw from your retirement fund when an emergency comes up.
Important: Aside from saving up, its also imperative to learn how to manage your emergency fund.
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What Is The Pera Db Retirement Plan
In a nutshell, the PERA DB plan is a pension retirement plan. No matter how much money an employee contributes to the plan during their career, they will receive retirement benefits for life upon retirement. The amount of benefit they receive each month will depend on their years in PERA service, age at retirement and highest average salary.
Both the employee and CU contribute to the account.
Personal Equity And Retirement Account
Minimum initial investment: Php 1,000
Estimated fund value after 25 years :
- Minimum contribution of Php 1,000 per month: Php 1.24 million
- Maximum contribution of Php 100,000 per year: Php 10.91 million
PERA is a voluntary savings and investment account meant to help Filipinos build their retirement fund. It aims to supplement pensions that retirees receive from the SSS or GSIS.
Funds are invested in diversified instruments that include stocks, government securities, mutual funds, and unit investment trust funds .
Everyonewhether employed, self-employed, or OFWwhos earning an income and has a tax identification number can invest in PERA. You can set aside up to Php 100,000 every year. If youre an OFW, youre allowed to double your savings to Php 200,000 yearly.
PERA is a good way to save for retirement, as it allows tax-free withdrawal when you reach the age of 55. It provides a generous tax exemption on investment income, which helps increase ones retirement fund.
How to start investing in PERA:
Open an account with an administrator by visiting its branch.
Submit the PERA requirements such as valid IDs, income tax return, a deposit account with the bank, and your payment for the initial investment.
Youll be asked to fill out forms to provide your information. After that, your PERA account will be activated.
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Pera Or Social Security
The choice then is for the State of Colorado to run a PERA-type retirement plan, or enroll its employees in Social Security. This is where so many criticisms fall down. If you are against PERA then that means you are FOR moving back into Social Security. There is no third option.
This is important because the State contributes a percentage of an employees salary to PERA on behalf of the employee. This amount varies, but is currently 16 percent.
Three percent of this amount comes from the budget for employee salaries. In other words, the pool available for salary increases for employees is 3 percent smaller for increased contributions.
Employer contributions to Social Security are 6.2 percent. When comparing the cost to the State for PERA, it is important to remember that the entire 16 percent could not be saved by eliminating PERA because then the State would, by law, have to contribute the standard 6.2 percent to Social Security instead.
It is also important to note that unlike most other large employers, the State of Colorado offers its employees no match on 401k contributions as an offset to higher contributions to employee pensions.
Social Security System Retirement Plan
The mandatory SSS deductions that employees get in their salary accrues into a liveable pension amount of P10,900, given that the employee had been consistently contributing for 30 years. The contributor may also opt for a lump sum with the interest added in.
Recently, in line with the upcoming hike in the SSS deductions , the pension was approved to go up to P20,300 by 2026. Other benefits will also get a boost such as the sick benefit credit , maternity leave , and funeral benefit .
But for now, the monthly pension is calculated the following way:
The Monthly Pension Shall be the Highest of:a) 300 + + x orb) 40% x AMSC orc) The minimum pension of P1,200, if with at least 10 CYS or P2,400, if with at least 20 CYS, whichever is applicable
*AMSC Average Monthly Salary Credit
**CYS Credited Years of Service
Per the SSS, to get the most out of the retirement plan, the contributor may choose to retire after the age of 60. The monthly pensions will be adjusted accordingly when the contributor finally decides to retire.
Much like PERA, the SSS retirement plan comes with certain risks. Even with the hike, the SSS funds would eventually be depleted by 2040, meaning if nothing changes, the Gen Zers would not be able to benefit from the SSS retirement plan.
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Protect Your Finances Through Insurance
Protect your assets against disasters, accidents, and other unforeseen events through insurance.
It may seem an added expense, but insurance can help prevent your retirement fund from getting wiped out when something bad happens to your assets or yourself.
Prioritize getting life insurance, health insurance, and disability insurance for your peace of mind. If you own a home or car, having home insurance and car insurance policies will greatly help, too.
Penalties For Early Withdrawals
Because youre investing for retirement through PERA, you cant touch your funds until youre 55 and youve contributed for five years or longer. Earlier than that, you can fully or partially withdraw your PERA contributions, but youll no longer enjoy the tax incentives.
Exempted from early withdrawal penalties are PERA contributors with a permanent disability or those hospitalized for over 30 days due to an accident or illness.
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How Do I Invest In Pera
Requirements for opening a BPI PERA account: BPI savings or checking account to serve as a settlement account. Valid government ID. Tax Identification Number TIN ID or copy of the Income Tax Return or any document that can validate the TIN. 1,000 Pesos Initial Amount of Investment and exclusive of Fees.
Consult A Registered Financial Planner
Unless youre a trained professional in finance, you need expert advice and guidance from a registered financial planner whose knowledge, experience, and skill can help you make sound investment decisions.
To start off, you may check the list of registered financial planners in the Philippines on the RFP Philippines website.
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