MANILA - Saving up for retirement is not easy, but depriving oneself today is not the way to do it. Factors such as inflation and unexpected medical expenses should be considered when building a retirement fund, a financial planner said.
“Enjoy life but prepare for it, you only have one life to live make sure it counts. Don’t spend everything, set aside money but enjoy life at the same,” Randell Tiongson told ANC's On The Money
Tiongson shared some tips to build a retirement fund properly
1. Start early
The ideal time is to save up for is 20 years, Tiongson said. This way, a person can save little by little and at the same time, enjoy spending some of his or her money today.
"You just take it one day at a time, learn a little bit, save a little bit, invest a little bit and then do it again and again. By the time you’re retiring you’re smiling because you’re looking forward to it," Tiongson said.
2. Prepare for the unexpected
Medical costs like doctor’s fees are impossible to compute in advance despite having saved up. Tiongson’s advice is to prepare extra in order to handle unexpected surge in expenses.
“Example, if you think you only need 10 million upon retirement, maybe you’d like to top it up to 15, then when those things happen you have the money,” Tiongson said.
3. Consider inflation
When saving for the future, understanding the behavior of the prices of goods is important.
A million pesos in retirement fund will only last for more than 3 years if a person spends P25,000 a month, Tiongson said. But it can be clipped further by inflation or the rising cost of basic good such as food and fuel.
“If the economy is more robust, inflation happens whether you like it or not, that’s not necessarily bad, you just have to prepare for it,” Tiongson said.
A simple trick shared by Tiongson is to consume lesser alcohol and cigarette if their prices continue to rise.
4. Assume, plan and act
Computing a retirement fund is somewhat similar to predicting the future, “assumption is a very important thing but again, you can only assume so much," Tiongson said.
The biggest risk is "not doing anything," therefore planning and executing the plan should follow suit. Filipinos should also get rid of their "bahala na si Batman or fatalistic mindset, Tiongson added.
5. Consider “active” retirement
For those who cannot afford to save enough for their retirement, “just getting some money after retirement is a good idea,” Tiongson said.