For seniors: Ways to grow your retirement money

As high school students, we were oft told by our class adviser, Mr. Basa -- God bless his soul -- two things: that it is better to be on the giving than the receiving end, no matter how you look at it; and that we must save as early as we can for our retirement.

If I only had known how important that was back then, I would’ve started right then and there. No more playing Street Fighter in the arcade (Yes, that’s how old I am). Everything, even money for occasional buys of Spiderman comics would go to my retirement fund.

My parents, being early retirees, are still waiting for their Social Security Services (SSS) pension. The mandatory retirement pay law covers employees with one-half monthly salary for every year of service, with six months being considered a year. If I understood correctly, this would mean a full month’s salary for every year of service.

That’s about it really, for most of the Filipinos. Retire, get pension. We don’t have 401K, which is an investment fund in the US for retirement which can be invested and combined with other retirement funds, and is, at least for now, safe from intervention (i.e. taxation) by the US government.

The 401K reduces your taxable income because if you choose to participate in it, the voluntary deduction would be made before taxes. Even the earnings from investing the 401K are not taxed, so tax can be deferred, in several ways most interesting to tax lawyers. You can borrow from your 401K, say a housing or educational loan, and you’d have to pay interest, but that would be funneled back to your 401K as well. That’s the beauty of it. Careful in where you invest it though. When we have its equivalent here in the Philippines, remember never to invest it in one place, as most do with stocks. If the company goes bye-bye, so does your pension.

Here, what we have is what the Securities and Exchange Commission calls the fourth tier or protection. No, they’re not giving their position on the RH bill and family planning. This just means that the investment retirement funds have begun to improve with various international money outfits gaining ground here.

The Personal Equity Retirement Account (PERA), supposed to be the equivalent of the 401K, conceived in 1999, and should have been released in 2010, has yet to be implemented. PERA is a voluntary contribution apart from the mandatory SSS pension, expected to bring more financial independence, and hopefully, more trips to Luneta Park armed with tuna sandwiches for our mature citizens – where they can talk with their grandchildren, or their imagined pre-adolescent selves.

Lacking financial reinforcements, seniors use retirement cheques as department store gift certificates. They exchange the cheques for cash in the underground economic bustle, but slightly discounted, of course, with his or her consent, might I add, lest we be misunderstood.

Is it time for the Philippines to have its faithful version of 401K? Yes. The Pinoy now dreams big, and that is one sumptuous avenue to go about it. But even without it, and as we await, we do have financial companies offering a money security smorgasbord.

You already know about the usual pension and educational investment options. Life insurance can give endowments and annuity to old contracts. Sun Life, however, has very Filipino investment products that can be used to save money for special events (Sun Kaganapan), business starter fund (Sun Kabuhayan), travel money (Sun Lakbay), and added retirement benefits, of course (Sun Pensionado). Take note of the awesome Pinoy names, and check them out.

Manulife, on the other hand, is famous for its health and pseudo-educational investment options. I say pseudo-educational because, unlike the usual educational funds which have stigmatized most of us, Affluence Builder gives cash payouts to your beneficiaries, which in our case is my daughter. When she reaches college, she will be given a lump sum of about a semester’s worth in Ateneo. Not much, but still, one thing less to worry about. Investment earnings from the policy can be withdrawn at certain times, deducted from the lump sum, should better investment opportunities arise. Granola oil hardening as it sleeps in the cold your money shall not be.

Did this awaken the player in you? Thinking of better ways to make your hard-earned money grow for your retirement? Here are a few:

Mutual Funds is just like having a stockbroker, but you have a company doing the investing for you, and it is able to invest it in Money Market, Bond, Balanced, and Stock Funds. Diversity is what makes mutual funds more enticing for folks who would like to have, more or less, a more secure option than stocks. Mutual Funds are essentially different types of stocks and bonds combined anyway.

I have been hearing of this a lot here in the Philippines. I will soon investigate further.

Provident funds like the one in University of the Philippines at Diliman, UPPFI, gives additional retirement benefits to its employees. Much like the 401K, the pooled money is invested, through assets gained, net worth, and vigilance in investment monitoring of government securities, bank interests, and member loans. Contributions by the employee are matched by UP, and if service to the institution span 10 or more years, are exempted from taxes. Housing loans and life insurance up to Php 100,000, provided by Sun Life are the most common incentives for joining this particular provident fund.

Life Insurance can be used as collateral for various bank loans. Think of it as added pogi points for your credit rating. A part of the death benefit or all of it can be given to the lender. You can also take out that policy to get the loan, and you will, since it is a guarantee that the debt will be repaid in the case of an untoward event – heaven forbid.

As a working man or woman, whether with a family or not, for most of you, betting on the SSS pension alone will not be enough; while we are waiting for PERA to materialize, I suggest you take a look at the other voluntary pension plans – choose that which fits your budget and complements your lifestyle the most.

For, as the late teacher, Mr. Basa told the boy that was me, “Give and ye shall receive,” or was that given by the blasphemed proponent of the Mideo Cruz obras? (The ‘artist’ is not related to yours truly, by the way.)

Photo: from guardian.co.uk

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