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Preparation for retirement: Things you should consider
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.
By 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.