Retirement 3 MIN READ

What to look forward to beyond retirement 

Depending on how you look at it, retirement can be exciting or scary. We have prepared a short guide to help you make your post-retirement years worthwhile and fulfilling.

September 14, 2023By Bjorn Biel M. Beltran, BusinessWorld

You may already have your retirement account set up in a diversified portfolio somewhere, accumulating wealth until you finally decide to retire for good. Perhaps you are looking for ideas on what to do with all of that along with your newfound time.

Many people who learn of financial literacy— including an increasing number of young adults—have retirement as the end goal of their financial journey. But few ever think about what they want to do after retirement. For many hardworking adults who have reached senior years, retirement turned out to be more challenging than they were led to believe.

In fact, a 2019 study in the UK showed that many British pensioners found that the average retiree becomes dissatisfied with their life after only one year of retirement, and described the period as “boring,” “lonely,” and “quiet.” The study also noted that the biggest drawbacks of retirement were financial difficulties, boredom, and isolation.

The transition into retirement can be both exciting and daunting, filled with uncertainty and anticipation. But it does not have to be boring or lonely. Instead of viewing retirement as the end of an era, it can also be seen as the beginning of a whole new chapter.

Consider your financial situation before retirement

Before hitting your senior years, it is important to consider how to manage and make the most of your retirement savings.

  • Create a financial retirement plan — Consult a financial advisor who can help you create a comprehensive retirement plan, which can help ensure you allocate your investments into assets that produce a steady income stream. The retirement plan should also include anticipated living expenses.
  • Get healthcare and life insurance — As you age, your healthcare needs may change, and it is vital to have adequate coverage to protect yourself from unexpected medical expenses. Research various healthcare plans and consider long-term care insurance to provide financial security in case you need assistance in the future.
  • Create an estate plan — It might be intimidating, and many people might prefer not to think about it, but this is the time to do so. Creating a will (a legally binding document) and establishing a power of attorney can help ensure that your assets are distributed accordingly to your beneficiaries.

Enter retirement with your passion

With your financial situation settled, it is time to think about what you want to do. Retirement provides an excellent opportunity to reignite your passions and pursue hobbies that may have taken a backseat during your working years.

  • Start a hobby — Whether it is painting, gardening, playing a musical instrument, or woodworking, engaging in activities that bring you joy and fulfillment can enhance your life. Even if you had already been doing them before retirement, consider this time to be your chance to pursue your passion to the next level.
  • Join social clubs — Share your interests with others. With social media apps, finding a community of like-minded individuals near you is easy and it can be a stepping stone for learning and growth.
  • Study again — Take the time to research workshops, classes, or online courses that can help you develop new skills or deepen your knowledge in areas that interest you. Even if you do not have a hobby, or know what sorts of activities you like, now is the perfect time to try. Prove to yourself that you can learn and accomplish new things regardless of how old you are.
  • Travel – Without work commitments or time constraints, you can embark on adventures you have always dreamed of. Whether it is a cross-country road trip, a tropical beach vacation, or a journey to far-off lands, retirement opens a world of possibilities.

Retirement does not need to mean the end of your personal growth. In fact, there is no better time to explore new interests and expand your knowledge.

Retirement is far from the end, so think of it as the beginning of an exciting new chapter in your life. Whatever you choose to do, remember that this is your time to savor and celebrate the achievements you have made over the course of a lifetime.

Seize the moment and make the most of the many years to come. You have earned it.

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Estate Planning 5 MIN READ

Asset Protection Strategies for the Wealthy: The Psychology of Insurance

Emotions, while useful and making us human, can also thwart intelligent decision-making when it comes to insurance and asset protection. Exerting the effort to appreciate what insurance is and reflecting on a few questions may help.

August 2, 2023By Anthony O. Alcantara

“While we are, death is not; when death is come, we are not. Death is thus of no concern either to the living or to the dead. For it is not with the living, and the dead do not exist,” said the ancient Greek philosopher Epicurus.

We could probably be happier with that thought. But still, the consequences of death, cannot be ignored. And when death comes knocking, a well-considered insurance policy is a crucial thing to have, especially for the wealthy.

There is just one perennial problem.

“They don’t want to talk about dying,” said Dexter Agcaoili, Director of AXA Philippines’ Single Premium Products and Unit Linked Funds Category.

“The topic of death is not easy. Even for the young HNWIs, even if they truly appreciate what insurance is, they find it difficult to discuss it with their parents. It’s deemed an inappropriate topic because it seems like they’re already keen on their parents’ wealth even if they’re still around,” said Agcaoili, who has decades of experience in various companies handling wealth management for high-net-worth individuals.

Common mistakes of HNWIs

He said the most common mistake wealthy people make is thinking that they do not need life insurance because they are wealthy and that they have more than enough to leave behind for their families.

On the other hand, there are those who still think of insurance with a purely investment mindset. They expect returns, particularly with the variable universal life (VUL) insurance type. Many think it is purely an investment that is primarily meant to grow.

In both cases, there is a lack of appreciation for life insurance protection.

“They are comparing it to the usual mutual funds or UITFs (unit investment trust funds), which are not insurance products. Single-premium VUL insurance has a death benefit that pays at least 125% of the single premium paid regardless of the market value of the underlying investment funds,” said Agcaoili.

Some subscribe to the view of “buy the term, invest the difference”, which means buy the cheap kind of insurance (e.g., term insurance) that can cover you for, say, 10 or 20 years, and then invest the rest of your money.

The drawback, however, is that after 10 or 20 years, you don’t have protection anymore. And all your investments will then be part of the taxable estate subject to estate tax, and frozen until that tax is paid or garnished to satisfy any debts and other legal obligations.

2 uses of insurance policies

The first important use of insurance is the settlement of estate taxes.

Even if the estate tax has been reduced from 20% to 6% under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the importance of insurance in estate planning has not diminished.

“You don’t just really allocate 6% or 10% of your wealth to life insurance. If you really analyze what the essence of estate planning is, it is planning all the way until death. You make a plan that will really take care of your estate, and it will be disbursed according to your wishes,” said Agcaoili.

“The tax regime can change, so 6% earmarked for inheritance tax may not be sufficient as the tax rate can go back to 20% in the future,” he added.

The second important use of insurance is wealth transfer.

According to Agcaoili, one use of life insurance is to ensure the seamless and legal distribution of your estate without the encumbrances of probate proceedings, taxes, and garnishment.

“It’s about the seamless transfer and distribution of wealth to your heirs. It won’t form part of the taxable estate for irrevocable beneficiaries. The insurance company can readily write a check to each beneficiary in accordance with stipulations in the insurance contract, which makes the wealth distribution more direct,” he said.

More sophisticated HNWIs would use a life insurance trust, a type of legal arrangement where they assign a person or corporation to hold their life insurance policy, money, property, and other assets and manage them according to their wishes, even after they pass away.

Trends in insurance

Agcaoili noted that in the past few years, HNWIs have sought insurance policies with high insurance coverage, like regular-pay or limited-pay insurance products.

What is also becoming popular are traditional single-premium endowments, which are insurance policies that provide guaranteed cash benefits on top of the insurance coverage.

“Similar to fixed income instruments, endowments provide a guaranteed cash benefit payout over a limited term like 7 or 10 years, with a certain protection of, say, 125% of the single premium amount,” explained Agcaoili.

The insurer guarantees an annual endowment payment and the payment of the initial single premium amount upon the insurance policy’s maturity.

Others want more flexibility with bespoke solutions, which could include riders, or add-ons, to the policy, such as critical illness riders.

Key things to remember

“By studying and appreciating the value and advantages of life insurance, we can fully maximize its benefits in terms of estate planning and wealth distribution,” said Agcaoili.

It would also help to be more aware of the psychology and emotions that somehow muddle the way people think about insurance.

A few questions may help:

1. What role can insurance play in my estate planning? Can it pay for estate taxes? Can I use insurance to distribute my wealth when I pass on?

2. Am I buying this insurance policy for the right reasons? Do I appreciate the life protection coverage that it provides?

3. Will there be an equitable distribution of wealth among my beneficiaries?

4. What emotions are getting in the way of my decisions?

Thinking about death may not be pleasant. But philosopher Peter Cave of Cambridge University provides us some food for thought: “Live so you will have no regrets if you die tomorrow, but also no regrets if you don’t.”

If you don’t want to have any regrets, it may help to consult your investment advisor, too.

(And if you are a Metrobank or AXA client, you may call your relationship manager for assistance. Not a client yet? Please click here for Metrobank or here for AXA Philippines.)

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.

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Retirement 3 MIN READ

Five common pitfalls in estate planning

Learning from the mistakes of others can help us do a better job at leaving a legacy for the people we care about.

August 26, 2022By Anthony O. Alcantara

Who doesn’t want to leave their loved ones happy when the grim reaper calls?

Our legacy is the only thing that will comfort those we leave behind. And part of that legacy is our estate, which, if we plan well, will benefit our loved ones according to our wishes.

Wanda Beltran, Metrobank’s Head of Account Management, who’s been taking care of the financial affairs of many shrewd and hard-to-please high-net-worth individuals, lists some common pitfalls.

1. Focus on the beneficiary and tax.

There’s just no way to escape taxes even when we pass on. And because we don’t want to pay more than we must, some of us may seek to avoid taxes, especially since we want our beneficiaries to get more from our estate.

Beltran said that some people do fall into this trap by transferring ownership of their assets to their beneficiaries too soon. One manifestation of this is when business owners decide to convey most of their shares to the next generation, thinking that their children will continue to honor them as the heads of their companies.

“That may not always be the case. There is nothing that will stop the children–who are now majority owners of the company–from booting out their parents if they want to,” said Beltran.

Another example is when parents buy properties and put them under the names of their children.

“But what if the children marry and the marriages don’t work out?” said Beltran. “It would have been better if the property was given after the children got married, because the property would be theirs even if their marriages failed.”

2. Focus on death.

Others focus on death, such that they only want their assets to be transferred when they die. Perhaps they subscribe to this improvident idea that what happens after they are gone is of no consequence to them.

After all, they won’t be around to witness the repercussions of their action or inaction.

There are certainly those who find it hard to let go. And with the TRAIN (Tax Reform for Acceleration and Inclusion) law now setting both the estate and donor’s tax at 6 percent, it may seem that there is no benefit to transferring assets within one’s lifetime.

What people fail to realize is that paying 6 percent for donor’s tax today is better than paying a 6-percent estate tax for property that would likely have gone up in value, such as real estate.

“Now for those who don’t care, they only need to read about the horror stories involving the dissipation of estates due to litigious family disputes,” she said.

3. Failure to consider present needs.

Sometimes we opt for what is convenient rather than what is appropriate. Beltran cited as an example the practice of using the “or” for certain joint bank accounts.

What if the person who put in most of the money gets sick or suffers from a stroke? The other joint account holder will be able to get all the money easily. When the patient wakes up, he is left with an empty bank account.

“It’s sad that people don’t think of their present needs without considering the risks,” said Beltran.

4. No further accumulation of wealth.

“If you plan to leave something behind to your heirs, shouldn’t you be concerned about the proper management of these assets?” asked Beltran.

Take the case of the husband who left a huge sum of money to his wife when he passed away, owing to a generous insurance policy. But then the wife had zero knowledge of investment. Soon the money was all gone, and nothing was left even for the education of the children.

If the family has no expectation of accumulating wealth or having a reliable income stream, there has got to be some plan to manage the assets.

5. Resort to tax evasion schemes.

There is a need to stamp out this mindset of tax evasion among some people. Perhaps it was because estate taxes were once as high as 15 percent. If you had a PHP 50-million estate, that would have been PHP 7.5 million in estate tax.

“Recently, however, people have become more compliant and law-abiding because of the TRAIN law,” said Beltran.

Knowing these pitfalls when planning for your estate is one thing; doing something about them is another.

If you want to do estate planning right, talk to your financial services provider, and start that conversation.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir. 

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Retirement 8 MIN READ

Things to ponder on before your retirement

How financially prepared are you for retirement? Here is a list of things you may want to consider to ensure a smooth transition into retirement.

December 22, 2021By Rommel Enrico C. Dionisio

There are people who retire, only to come out of retirement in a few months or years. When asked for the reason, some will say they got bored or they miss the challenge. Unfortunately, a good number will say the reason is financial in nature. Yet, not all will have the luxury of having access to a job anytime he or she wants — that is why we really need to prepare for our retirement.

Preparing for retirement is no easy task, and I would say it is more of an art rather than a science. What will work for one person might not necessarily be true for another.

I have observed that individuals normally procrastinate on this matter, saying “I’m too young to be planning for retirement” and preferring to enjoy life as it goes on. There’s nothing wrong with enjoying our careers, but we must bear in mind that retirement is not always our choice, especially under the situation we are currently in. I myself will be retiring in eight years, and I have been spending a good amount of my free time asking myself if I will be ready by then.

How prepared are you?

Being prepared for retirement largely involves financial preparedness. A big part of financial preparedness will be a function of your chosen lifestyle, the timing of your retirement, and your health condition when you retire. Your chosen lifestyle and time of retirement are both within your control, while health conditions can potentially alter your preparedness. For instance, there are cases where the retirement money was completely wiped out because of medical expenses.

How, then, will you assess your preparedness for retirement? Asking yourself the following questions can help you gauge if you are almost ready: Will I have an outstanding mortgage that I will need to amortize after my retirement? Will my kids be done with their education by then, or will they take up further studies? What is the minimum amount I will need to cover my day-to-day expenses? (You have to factor in inflation for that).

Moreover, ask yourself how much retirement money you will get and what will be the interest rate at that time. Gone are the days when we can live on interest. You should also figure out if you have enough insurance coverage, and whether you have passive income other than your SSS pension.

In addition, check on your health and determine whether you have medical coverage after retirement. Determine as well your estimated life expectancy.

To further assess your financial preparedness, imagine how your life will be if you retire. If your concern will be what to do with your idle time rather than how you will deal with the basic necessities (e.g., paying bills), then you are likely prepared. The ‘idle time’ concern can be easily addressed as long as you have financial security, while the latter concern will be a bigger problem because it will cause you anxiety.

While financial preparedness will be a more pressing concern for those nearing their retirement, those who are still far from retirement should also consider this. Regardless of how long you’ve been in your career, you should realize that you would retire at some point. You will not be working forever. The sooner you realize this, the earlier you can prepare for your eventual retirement.


Preparation for starters

Retirement can be either a personal or a mandatory choice. Ideally, we prepare for it as early as we can. But, in reality, there are a good number of us who are very close to retirement age who have not given it much thought.

If this is your situation, you have to start somewhere. For starters, you should have a clear idea of your estimated years of work before retirement. Then, you have to determine if you will be eligible for retirement pay.

If you have been switching jobs, there is a high chance that you will not be getting substantial retirement pay. So, you’ll just have to rely on whatever savings you have through the years.

Once you have determined your remaining work years and eligibility for retirement pay, you have to consult financial experts. Set up a meeting with your trusted banker or financial advisor, and have an honest-to-goodness conversation on how they can help you manage and grow your existing savings and retirement pay.

In addition, you can consider setting up your own business, as this is another alternative source of passive income; but you need to ensure you have a solid business model. It is also advisable not to put your entire retirement money at risk.

Financial tools will always be there to help you plan your retirement, but it will all boil down to how much you can set aside on a monthly basis. Depending on the amount you have saved and your risk appetite, you can choose to invest in time deposit/unit investment trust fund, equities, property, and insurance with medical coverage, to name a few.

Of course, to begin with, you should make sure you have funds to invest. Then, you have to ensure you have a good understanding of the financial products out there.

In case you are not yet fully aware of these tools, it is never too late to reach out to your banker or financial advisor who will be more than willing to share their knowledge with you. Financial advisors can help tailor-fit solutions to cater to your specific requirement. Make sure you give time for open conversation with them on where you are in your retirement plan.

Metrobank can help you with these specific needs. We have highly trained investment specialists who can recommend products based on your need. You can also be referred to our Trust Banking services or our partner AXA Insurance for insurance-related solutions.

ROMMEL ENRICO C. DIONISIO The author has more than 20 years of banking experience particularly in Corporate Banking and Treasury/Markets. He is a B.S. Management Graduate from Ateneo De Manila University and earned his Post Graduate Degree from Asian Institute of Management.

This opinion article is part of Metrobank’s Financial Education campaign series.


This article was first published on BusinessWorld.

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Retirement 6 MIN READ

The Pursuit of HappyNEST

Preparing the next generation for the family’s wealth can be a difficult balancing act. Find out what you can do to make it easier.

December 14, 2021By Lizette Perez

Wealth management and preservation for the ultra-high-net-worth (UNHW) is a daunting task which goes beyond financial management. More importantly, it involves the perpetuation of the family legacy. This is why it is equally important to ensure the general well-being of family members across generations.

UHNW families have various business interests and own substantial assets locally and offshore. With multiple sources of income, they have complex needs and face numerous concerns that need to be managed well. First among these is BUSINESS — the setting up of strategic vision & direction as well as day-to-day business demands. Second is management of financial and & real ASSETS, owned individually and by the family. Third is FAMILY MANAGEMENT.

The first generation is usually focused on business and asset management because wrong decisions could result to huge financial losses. For this reason, they engage the best consultants in the industry to deploy or reallocate assets to the next most promising venture, talk to their bankers about loans and investments to maximize business profits and optimize portfolio returns.

What about Family Management? How important is this for the UHNW?

Many among us are familiar with numerous celebrated “Family Feuds” that have turned mean and ugly that has led to costly legal tussles over control of business and assets which sadly ends up in the tragic breakdown of family relationships. Surely, this goes against the long-term vision of the wealth creator for the clan.

This leads us to the main thesis of this piece:

“That breakdown of the family system is the single biggest destroyer of wealth and the one true source of unhappiness among the affluent. Wealth is not meant to destroy family relationships, it is meant to forge it.”

Pinoys are generally known to be ultra family-centric. Parents look to accumulate wealth over and beyond what they need because it is critical to leave something substantial to the children. However, only a few believe that their children are prepared to handle a huge inheritance and even fewer have revealed their actual wealth to their heirs. Most Filipino families have weak successor training and very restricted information sharing.

Why is this so? Why are Filipino families not actively addressing this area of concern?

Parents are rightfully concerned that knowledge of wealth may affect their child’s values, work ethic and security. And while they truly believe that the family would benefit from developing a formal set of principles to guide the purpose and meaning of their wealth, only a selected few have actually done so. Why? Perhaps because crafting a family vision is a long and tedious process that involves commitment from all family members.

Filipinos are innately family-centric. I often see this in parents who look to accumulate wealth over and beyond what they need because it is critical for them to leave something substantial to the children. Only a few of them, however, believe that their children are prepared to handle a huge inheritance, and even fewer have revealed their actual wealth to their heirs.

This is where trusted advisors come in. Usually, there is a need for an objective third party to fully unearth and understand interpersonal relationships, historical conflicts and other family needs. There are multiple providers & products available that help address specific areas of Family Management. Metrobank is well-placed to partner with independent counsellors who are experts in Family Education & Governance.

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For us, the state of “health” of our families is as important as the weather-proof portfolios that we build for them. In order to ensure the family’s well-being over time, these are some things that the first generation can reflect on:

  1. How are the children being prepared to handle bigger responsibilities?
  2. Are succession lines clear and defined?
  3. How will the perpetuation of the family legacy be ensured?
  4. Is there a STEWARDSHIP mindset in the family, or just consumption?
  5. Is there an effective conflict resolution process in place?

At Metrobank, we encourage clients to think about both Family Management & Portfolio Management because each family is unique and there is no one-size-fits-all solution for a successful wealth transfer strategy in the pursuit of a happy nest.

LIZETTE PEREZ is Head of the Private Wealth Division of Metrobank and has over 20 years experience in Private Banking. She is a B.S. Business Economics graduate of the University of the Philippines and earned her master’s degree in Economics at the University of Southern California.

This opinion article is part of Metrobank’s Financial Education campaign series.


This article was first published on BusinessWorld.

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