Most of us usually plan for retirement in our 40s or when we start a family.
A CNN Philippines report by Claire Jiao cites that only 7% of young professionals reported having a monthly savings plan, and just 8% had a quarterly plan. This is according to Manulife’s Investor Sentiment Index.
Such figures are alarming for a country with a large worker demographic. It implies that a massive chunk of the population will eventually be financially incapable of supporting themselves throughout their retirement in 30 years.
The best time to start thinking about retirement is NOW. Here’s how you can plan for your retirement in your 30s.
- Picture your ideal life when you retire.
It is challenging to stay on track for a goal that’s decades away but the sooner you start, the less regret you’ll feel when you hit your 40s and only realize you have zero plans in place when you can no longer work.
GRIT.Ph, a financial and entrepreneurship advisor company, lists the following questions for you to work around.
- When do you plan to retire?
- What’s the lifestyle you want to maintain during that time?
- How much money will your ideal lifestyle cost?
Expect to feel overwhelmed when you sit down and calculate the cost but let that fuel you to stay disciplined with your finances.
- Make your money grow with PERA
Republic Act 9505 established the Personal Equity and Retirement Account, a voluntary retirement account, which can be considered the counterpart of the Individual Retirement Account and 401 (k) retirement plans in the United States.
The Bangko Sentral ng Pilipinas guide provides the following information. With PERA, your investment earnings held for five years or longer until the age of 55 are given generous tax benefits by the government which would otherwise be burdensome under other private investment plans. Under the law, any person 18 years of age and above with a Taxpayers’ Identification Number may start investing and saving. This is the government’s initiative to promote early planning for retirement.
PERA gives you more freedom as to how much to invest since it does not take up a monthly deduction from your earnings while giving you optimal advantages like the government-sanctioned tax benefits while growing your money.
- Prepare for the inevitable: Get pre-need plans.
Pre-need health plans are suitable investments now that you are in the prime of your age. Premiums cost less if you get insurance early. More importantly, you’ll have peace of mind in emergency medical situations that are hardly ever cheap. You won’t have to dip into your savings if you’ve secured yourself (and your family) from sudden financial blows.
- Only engage in business of which you are passionate or knowledgeable.
The current trend among people in their 30s is to retire when their 50. Planning for early retirement is one of the best ways to stop procrastinating around building your nest egg.
Engaging in business is one way to have more control over your future. If you’re brave enough to venture on your own (or with business partners), stay close to what you’re genuinely interested in or to what you’re willing to learn about. Be realistic about the business’ sustainability and always plan to scale.
Study up on how other similar businesses did it. Learn from case studies to be mindful of possible weak points when it’s your turn to execute.
- If you do open a business, avoid spending spend out-of-pocket.
What the statement above really means is that you shouldn’t be afraid to take out a loan or apply for financing when you want to grow your business at a faster pace. Big companies exponentially grow their profits by using current properties as collateral to develop more products that will become a new income stream.
As long as you have a clear track you can stick to, the returns will outweigh the risks. The sooner you reach your financial milestone, the sooner you can worry less about retirement.