(This is part of Take Charge of Your Money, a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)

Question: I’m turning 60 in three years and I’m thinking of retiring by then. I’ve been working as a school principal for the past 15 years, and teaching for close to 40 years now. I enjoy my work, but I envy my siblings who have retired ahead of me. They now live more laid-back lives and get to travel often. One of the things bothering me, however, is my finances. I have some savings and an SSS pension coming, but I don’t know if these will be enough to live on for the rest of my life. How can I know for sure? – Mila

Answer: Ideally, retirement is a golden time for most people — a time to stop working, rest, and generally enjoy life. It’s something to look forward to after decades of waking up early every day to go to work.

That is, if you have built up enough funds in savings and investments to give you a regular income stream during retirement. Let’s face it — pensions from the Social Security System and the Government Service Insurance System will not be enough for anyone to live on. The pensions may help a retiree with his expenses, but may not be enough to cover all costs.

You said you would like to retire next year. This early, sit down and figure out if you have enough funds to retire.

Start by listing down all your savings funds — these may be in savings accounts and time deposits. Then write down any investment you may have, from cash investments (stocks, bonds) and fixed assets such as real estate properties. How much do your savings and investments earn every year? Check the interest rates for an estimated figure. Add to the list your expected SSS pension amount for a whole year. The total will be your estimated income stream annually starting next year.

Next, determine how much living now costs you. For a month at least, write down every expense you incur every day. Total this at the end of the month then multiply it by 12 to get an estimated annual figure. Add to this amount any expense you may have to pay for yearly, such as real estate taxes, insurance, and the like. You will then arrive at your approximate cost of living for a year. Add an assumed inflation cost, say 10 percent, to get an estimated figure of your cost of living by next year.

Now for the clincher: Subtract your estimated cost of living from your estimated income stream. Is your income stream at retirement enough to cover 80 to 100 percent of your living expenses? Would it grow enough to sustain you for the next 10, 20, or 30 years? Your answer will determine if you can afford to retire next year.

Sadly, many retirees and would-be retirees realize that they do not have enough funds to live on at retirement. If you belong to this group, don’t despair. There are still things you can do:

1. Consider delaying retirement or working part-time. You are still healthy and alert, so you can still work and earn. If the thought of working full-time seems tiring, why not try working as a consultant with flexible working hours? You may even work at home at your own pace minus the traffic and daily grind.

2. Consider moving your savings in higher-yielding investments. If your funds are all in a savings account, consider bond mutual funds or unit investment trust funds (UITFs). You may potentially earn more than what savings account may offer you in interest. Be wary of get rich quick offers though – when it is too good to be true, it likely is.

3. Downsize. If you are living in a big home you own, think of selling it and moving to a smaller home. The proceeds may then be invested, and the interest income can be used to cover a part of your living expenses.

4. Think of other income possibilities. If you have a hobby, find out if it can generate income. Many retirees breed dogs, sell plants or crocheted items for extra income.

5. Rebalance your investment portfolio. If you’re a sophisticated investor, now’s the time to rebalance your asset holdings. Lessen your exposure to stocks and invest more in bonds and cash. At this time, it is more important to keep the value of your portfolio stable than aim for growth. Or, if you have more fixed assets than cash (what financial experts call “asset rich but cash poor”), think about selling those you don’t really need—an extra car, for instance. Then invest this in a higher-yielding investment.

6. Live simply. Look at your expenses again and see if there are costs you can reduce. This will free up more money that can be invested or used for more things you need, such as health care.

Take note that we have not factored in any financial help that may be extended to you by family members. While it has long been part of the Filipino culture to help provide for aging parents and relatives, we don’t advise that you count on this. The younger generation faces financial challenges of their own.

We hope this has been helpful to you. We wish you the best.

(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts)
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