Are 10 years of SSS membership good enough?

Question: I am told that SSS pension benefits will not really amount to a whole lot, probably just worth grocery money when I retire. Should I even count the SSS in funding my future retirement or should I just work hard to ensure I get a sizeable retirement pay from my employer? By the way, I am currently 30 years old but already planning way ahead. asked at “Ask a Friend, Ask Efren” FREE service at www.personalfinance.ph, SMS and Facebook.

Answer: Retirement, as stated in our book “Pwede Na! The Complete Pinoy Guide to Retirement and Estate Planning” is exactly what it says—putting on a new set of wheels for the next exciting phase in your life.

Contrary to common belief, retirement does not mean a screeching halt to work. Studies show that the more active a retiree is, the longer he or she will have to live.

Studies have also shown that life expectancies are getting longer. For one, the National Statistics Office projected that from just 6 percent of the total population in the year 2000, males and females aged 60 years old and older will amount to 9.2 percent and 14.8 percent of the total population by 2020 and 2040, respectively. Longer life expectancies will require more funding.

In upholding his dignity, a retiree will naturally want to still be financially independent. A retiree knows that relying on his children will all the more burden the latter’s finances, especially at a time when a family’s expenses are at their heaviest. When a parent retires, his children are just about at the life stage of basically just trying to make ends meet.

Financial independence demands a lot of financial planning and action way ahead of retirement age, exactly what you are doing now. And because expenses in retirement can amount to a lot, especially with the prospect of higher medical expenses, every little bit will be of use for retirement planning.

The SSS has a new contribution table based on new levels of monthly salary credit, the amount on which pensions are based. When I started to work, my salary was under P1,500 per month and was at the bottom of the rung in terms of equivalent monthly salary credit under the old contribution table. In Metro Manila, with the daily basic pay now at P537, the equivalent monthly pay of P11,814 translates to a monthly salary credit of P12,000.

On the assumption of 38 credited years of service with the SSS, and even assuming that the monthly salary credit stays at P12,000 all throughout, the monthly pension will be P10,420. This computation takes into consideration the credited years of service in excess of the 10 years prior to retirement.

The common misconception is that only the 10 credited years of service prior to retirement are considered in arriving at the monthly pension.

Now imagine if you were earning at least P19,750 monthly. That monthly pay translates to the highest monthly salary credit of P20,000. With the same assumptions as in the previous paragraph, you will receive a monthly SSS pension of P16,500. And if you had a spouse with the same SSS contribution specs, your combined retirement pay as a couple will total P33,000 per month. That is definitely more than just grocery money.

So, work hard to grow your income to at least the level that will hit the maximum salary credit with the SSS early. And if you happen to be self-employed, contribute voluntarily at the level with the highest monthly salary credit so that you get to enjoy the maximum SSS pension benefits. Contact the SSS for more details.