Monday, November 10, 2014

2 Ways on How To Financially Prepare for Retirement

Thinking about the day when you retire, are you going to be a blessing or a burden to your family and loved ones?

My Motivation

One of the reasons why I invested in Stock Market is because I wanted to plan for my retirement. That was when I was at age 24. Now, you might be thinking why I am planning about retirement when I am just in my 20's. Well, I'll tell you what motivated me. 

When my grandfather retired from work, he was able to get a large sum of money. He gave some portion to his sons and used some to support his candidacy in our municipality as a councilor. Sad thing is he didn't win and after a few years, he died. Since my grandmother only stayed at home and relied heavily in my grandfather's income, it was really a struggle - financially. My grandfather didn't have any savings left for my grandmother and so, my grandmother has to rely on her children. My father and uncles have their own families and therefore, only my aunt is able to provide my grandmother with a regular allowance. Seeing how things turned out, I started thinking about how I can avoid depending on the younger generations when I grow old. I fantasized. I dreamt and I envisioned myself to be financially capable of providing for myself when time comes that I can no longer work. But how can I do that if my savings would only give a few interest in banks. I couldn't even buy a happy meal with that. How can it even support me when I retire?

In order for me to have bigger interests, I need to save a large amount of money. But I can't set aside a big portion of my salary since I have to give financial support to my family. I am the eldest among the 5 of us. As some eldest children from a not-so-well-off family know, there is this unspoken responsibility to support the younger siblings when you start earning money. And so, I have to pay for the house rent, the utility bills, the grocery expenses and other financial obligations for myself and for my family.

With my everyday personal expenses, plus financial obligations and emergencies, will having a million peso saving in future even possible?

How Can We Prepare?

I know that I won't be able to get a large of money at an instant (unless I place a bet in lotto and win) so I need to act now, save a portion of my income and invest. And so I research for ways and found out that these two can help me in achieving my goal to be able to support myself even after retirement.
1. Stock Market Investment

As I mentioned before, you can start with this kind of investment with a minimum amount of 5,000 pesos. You can open your account in an online broker and use your initial investment of 5,000 pesos to buy shares. Every month, allot a portion of your salary and deposit to your account. Accumulate shares until you've reach a target price to sell your shares. Once sold, reinvest by buying shares again. This time, your buying power becomes higher since your money have already increased in value with the profit you got from selling previous shares. Putting your money in stock market helps you restrain yourself from easily withdrawing your savings since they are in a form of shares. You still have to sell them before getting your funds back. Stock market investment helps you avoid getting emergency funds from your savings.

2.Unit Linked Insurance Plan

What is Unit Linked Insurance Plan? According to, it is a type of insurance vehicle in which the policyholder purchases units at their net asset values and also makes contributions toward another investment vehicle. Unit linked insurance plans allow for the coverage of an insurance policy, and provide the option to invest in any number of qualified investments, such as stock, bonds or mutual funds.

Last year, I got my unit linked insurance plan. With this plan, I invest 20,000 pesos yearly which I pay at a quarterly basis. Why did I get this product? The unit linked insurance plan is a combination of insurance and investment. A portion of my 20,000 pesos given yearly is paid for the insurance and the other portion is invested in stocks. Now, I have both insurance and investment. This means that if anything happens to me, my beneficiaries will get a certain amount of money which is a minimum of half a million because of my insurance. For the investment portion, as time passes, I am able to buy stocks year after year. The stocks accumulate and when maturity comes, I can start withdrawing portions of my investment. This is what I can use for my retirement when I stop working. Like the stock market investment, this product will aid you in saving up for your future. Not only that, it also has an insurance which will benefit your family and loved ones.

In our culture, a lot of parents and grandparents are being supported by younger generations. This is because the older generation spent their earnings to support their family. They weren't able to plan for their future when they grow old and stopped working. As someone who experience this kind of set up, I am deeply motivated to save up for my future. When I grow old, I want to still be capable of supporting myself so that younger generation can focus more on preparing for their future.
We can be a blessing to our loved ones when we retire by saving up as early as now or we can scrap the idea of saving now, knowing that in the future there will be younger generations who will support you. And the cycle just repeats. Younger generation supports the older ones instead of younger generations building their own wealth for their future. It is up to us whether we would like to be a blessing or a burden to our family when we grow old. The solution is given - invest while you are still young. Only our actions are needed.