Money Matters

What to do with your retirement fund


Question: Where should my parents invest their retirement fund and savings?—James Magsumbol via Facebook

Answer: You and your parents are blessed to belong to the minority of Filipinos who have prepared for retirement. It is alarming to note that only a very small percentage of Filipinos prepare for retirement, so they end up being dependents of their children by the time they hit their golden years.

It is a good idea that you are asking about how to invest the retirement fund and savings of your parents. Many retirees make the mistake of not investing money during retirement for they fear they will lose their money or they just want to keep their cash.

While I agree that the bulk of retirement fund and savings should be liquid, part of the fund should be invested not for the sake of capital growth but as a means to preserve the purchasing power of your parents’ funds.

Inflation will not retire just because your parents did. Their retirement funds will still need to grow to catch up with inflation, which is why I recommended investing in some investments that can outperform inflation like bond funds or even balanced funds (mutual funds or UITFs).

Many retirees become short-term oriented when it comes to their money. But the fact is, they will probably live about 15 to 20 years more during retirement (longer hopefully). However, it is crucial to limit the allocation to maybe a maximum of 20 percent of their total money to the investments I mentioned as they are not guaranteed.

I would recommend that you sit down with your parents and take a look at their finances. Establish their monthly needs and go over their forecast expenditures.

You may want to put as much as 12 to 24 months’ worth of expenses in cash or near cash instruments like savings accounts or time deposits. The rest of the funds can be allocated to other kinds of investments, but always be mindful of the investment risks involve.

After allocating for cash and near cash investments, you may want to consider some mutual funds or UITFs—a good ratio would be 70 percent on bond funds and 30 percent on balanced funds.

Bond funds are relatively safe and, while they are not guaranteed, they are the least volatile among the funds. Since bond funds are relatively low-risk investments, don’t expect very good returns from them—they will perform better than inflation but not much better; 2 percent above inflation is a more realistic expectation of bond funds.

The remaining 30 percent can be placed in balanced funds, which are a combination of bonds and equities making them riskier than bond funds. However, the risk also means better returns, and you will need such growth to combat the diminishing impact of inflation to your parents’ retirement funds.

Since you did not specify the age of your parents, my recommendations are meant for retirees that are still not too senior. As your parents age, say 70 to 75, you may want to scale down their investments to lesser risk by removing the balanced funds, reducing the bond funds and greatly increasing their cash and near cash investments. As your parents hit 80 years old, you may want to keep all their funds in cash or near cash investments.

My recommendations are really just some benchmark figures as every situation is unique and people may have different objectives. Be prudent with your parents’ retirement fund. I hope this helps.

(Learn about proper retirement planning by attending RETIRE: The No Nonsense Retirement Planning Workshop on Aug. 17 at the Crowne Plaza. To inquire about this program, visit or e-mail


Randell Tiongson is a personal finance advocate and director of the Registered Financial Planner Institute Philippines. For inquiries, visit To learn about financial planning and how to become RFP, attend free personal finance talk on July 25, 7 p.m., at PSE Ortigas. To reserve, e-mail at or text Name<space>Email<space>RFP Info at 0917 3464126.)



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  • OFW_Investor

    The risks of loss in T Bills are actually guaranteed , with 1 year tenor about 1 % . With inflation at 3 to 4%, The returns are guaranteed to be -2% per year. Inflation is the chief enemy of fixed income investments, the same amount of money will not buy the same bag of goods next year. In the meantime, AP will deliver 5% dividend yield, even SMC preferred wil yield 8% per year at current prices. the diff is such that the Investor should seriously consider equity investing

  • Guest

    Better consult a certified personal finance analyst. The investment market has become a jungle of myriad of investment instruments and options.

  • OFW_Investor

    Buy the Dividend payers in the PSE yielding 5 to 6% at current prices. The yield can be withdrawn for expenses annually and still get a possible upside with capital appreciation of shares. While dividends can be eliminated/reduced by the Companies, look for those with wide economic moat and have consistent demonstrated earnings power.

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