How do you plan for your retirement?
Question: I have been working for many years and I don’t have any idea if I will ever retire because I don’t have enough savings. I spend almost all my income to my monthly expenses. How do I prepare for retirement? Please advise—Lotis Magracia by e-mail
Answer: If you have not thought about planning for your retirement, you are not alone. Almost everyone does not have a financial plan that clearly maps out how they plan to finance the lifestyle they want when they retire someday. Many are thinking they can just set aside savings regularly out of their regular income and handle the retirement issues later on when the time comes.
You may somehow manage to do this if you are big income earner. But if you are not saving enough or just relying on your salary every payroll, you may spend the final years of your life worrying about how you’re going to pay for your rent, or where to get the money to pay for your medication.
Achieving a comfortable retirement is not difficult if you start to plan as early as now. Retirement is not merely saving money for the future. It is also about investing and managing your risks.
The first thing to do when planning for your retirement is to imagine your ideal lifestyle when you have decided to stop working. Do you see yourself traveling the world with your family? Do you imagine yourself relaxing in your vacation house every weekend without worrying about your daily expenses? Do you want to have that lifestyle where you can spend whatever you want without relying on your children to support you?
As you imagine, try to estimate how much money you will probably need to have by that time in order for you to make your ideal retirement possible. Start looking at your present financial situation. Take an accounting of your financial life. How are you spending your income? Do you spend most of your money on latest gadgets, clothes or recreation? Do you have enough savings to invest? How much debt do you have at present and how are you paying it?
Once you have completed the accounting, take a hard look at your current lifestyle. Do you have what it takes to achieve your retirement goals? Do you need to save and invest more? You can do this by doing some calculations to project your investments whether it can support your goals or not.
If you think that your current spending pattern will not be able to help you achieve your retirement goals, you need to decide to adjust your expectations or look for other opportunities to increase your income. Perhaps, you can try to check your current spending and identify if there is any item that you can save. Any cut in spending will mean additional savings. More savings should translate to more investments.
The challenge in retirement is in the crafting of investment strategy. How much return do you need to grow your savings in order to achieve your goals? You may have to diversify your investments to achieve your desired rate of return. There are investments that are riskier but offer higher returns and there are also that offer lower return because it is less risky.
The allocation of investments depending on your risk profile will help you come up with the return that you will be most comfortable with. Your assumption will be the basis of your financial plan. Once you have the plan in place, you will need to reevaluate it regularly, maybe every six months to see if there are any changes that you wish to make. Reviewing your plan regularly helps you make sure that you are on track on your financial future.
This weekend, the Registered Financial Planner Philippines is organizing the 3rd Financial Fitness Forum at SMX Aura. This will be a great opportunity for you to learn more about building your financial security in the future. All the best-selling RFP authors and personal finance experts will be gathering in one event to talk about investments, retirement, education, wealth protection, budgeting and others.
You will learn how to grow your savings the smart way from best-selling author Efren Cruz. How do you handle the challenges of education planning amidst rising tuition fees every year? Personal finance advocate and TV host Edric Mendoza will show you the way. Investment expert Aya Laraya will talk about the practicality of long-term investing while best-selling author Marvin Germo will be sharing his tips on how to develop winning strategy in stock market.
What are the steps to achieve financial freedom? Best-selling author Christopher Cervantes will teach you how to build your wealth to be financially independent. A significant contributor to building wealth is the ability to manage your expenses well. Financial adviser and TV personality Salve Duplito will teach you how to master your finances.
Can you customize your investment portfolio according to your risk appetite? Investment advocate Jeff Gonzales will show you how to do asset allocation the right way. Once you have created your investment portfolio, how do you manage it to grow to achieve your goals? Top finance blogger Fitz Villafuerte will teach you how to diversify and minimize your risk for maximum returns.
To have financial freedom is to have the right money mindset. Best-selling author Lianne Laroya will share her tips on how to develop the right attitude toward saving money.
Do you really need a financial planner to help you? The forum will feature discussion on this topic with personal finance experts Rienzie Biolena, Ricky So, Jog Bondoc, Kendrick Chua and Edwin Suson.
Best-selling author Randell Tiongson will give the closing remark with talk on importance of financial planning. See you all this weekend!
(Henry Ong is a registered financial planner of RFP Philippines. To attend the Financial Fitness Forum on March 28 at SMX Aura, e-mail at [email protected] or text <name><email><FFF> at 0917-3464126.)
