Retirement is one of the life stages that we need to anticipate and plan for. Unfortunately, not everyone is ready for it.
In many households, retirement planning often takes a backseat. Some people depend on the retirement payout they will receive from their company or from mandatory government contributions. Others dwell on the idea that their family will care of them once they reach their golden years. People hold different views on retirement, but what’s certain is that concrete steps must be taken to prepare for this life stage.
How much is enough?
Based on the regional average, 2.9 years' worth of personal income must be prepared for retirement. A recent study gave a glimpse on how Filipinos think about retirement planning:
“In a recent survey, Filipinos believe that savings equivalent to 2.1 years’ worth of personal income is enough for their retirement, which is way below the regional average of 2.9 years. If you consider that the average current life expectancy of Filipinos is 72 and the standard retirement age is 60, retirement savings could be short by up to 10 years, maybe more.”
6 Retirement Planning Mistakes to Avoid
1. Failing to create multiple sources of income.
We need to consider the reality of having limited income once we stop working. In our golden years, daily living expenses are most likely to grow higher because of inflation and health-related expenses like maintenance medication.
Since savings is not enough, one must find ways to create different sources of income as early as now. We should also look into investments and other profitable ventures that can serve as our safety net even after our productive years have passed.
Take a look at financial products such as Sun Legacy, a limited-pay life insurance product with a savings component that offers guaranteed cash value and lifetime guaranteed cash benefits. Learn more about it here.
2. Relying on wealth transfers.
It is an advantage to be an heir to a family’s wealth, but it should not be the focus of our financial plan. Inheritance adds up to wealth, but you also must do your part to make the most of it. Instead of spending one’s windfall away, why not plan how to make it last?
With Sun Legacy, you will have a protection and savings plan designed for wealth preservation. It ensures that wealth will be efficiently passed on to loved ones. Through this plan, legacy is secured, and funds are preserved for the assigned beneficiaries.
3. Avoiding investments.
Should you save or invest? People who want to avoid risks would save their money rather than invest it. But if the goal is to prepare for retirement, saving money in the bank would not be the ideal choice. The best approach would be to have a sizable savings and find ways to make your saved money earn for you.
Invest and make it multiply. It is one way to earn money for life's surprises when you're already retired. Sun Life offers different investment vehicles that can help diversify your money.
4. Consider the inflation rate.
One of the basic retirement planning steps is to look into healthcare and the cost of living. However, it would be a huge mistake to compute based on current costs. Inflation is a factor that could get in the way between you and your goals. Check out Sun Life’s inflation calculator to know the amount you need to set aside for your future.
5. Relying solely on government benefits.
The Philippines ranks among the countries with the worst retirement systems worldwide. Retirees may avail of government and company pension plans, but more is needed to cover financial needs. You will need more than what the government can provide after leaving the workforce.
6. Taking health for granted during your younger years.
Health is wealth. As with how we manage our finances during our productive years, we will also reap the results of our health habits during our golden years.
Aging is inevitable but the good news is we can often stay in control of our health. A balanced diet and healthy lifestyle can help us avoid lifestyle diseases such as diabetes, cardiovascular diseases, and hypertension.
As early as now, we should invest in our health. Aside from lifestyle modifications, we should explore life and health insurance plans that can benefit us in the long term. SUN Fit and Well provides critical illness and life insurance benefits until age 100 and it also comes with bonus disease prevention programs.
A positive outlook on retirement
The changes that retirement brings may cause anxiety. People who worked hard for most of their lives now have more time on their hands. This newfound freedom brings mixed emotions. Some may see it as a loss of purpose when in fact, it could be the other way around.
The golden years could also be a time to pursue our passion and explore things that we didn't have time for. But for this to happen, retirement planning must be done and these common mistakes must be avoided to ensure growth, achievement, and fulfillment at this life stage.
Retirement planning requires immediate action. It is our future at stake. Gone are the days when retirement is viewed as idle years. Now, it is possible to be productive and experience growth even when our productive years have already passed.
Ready to plan for a worry-free retirement as early as now? Skip the mistakes that will get in the way of your financial freedom and talk to an advisor today!