June 4, 2025 l Business Mirror
There are many articles providing for amounts needed or certain rules of thumb for being able to retire safely and comfortably. However, I think that this amount can vary widely depending on the particular circumstances of the retiree. These factors would include their current financial position, physical condition, lifestyle, obligations and of course longevity.
As a starting point, you first need to consider your current financial situation covering how much you have in savings, what are your assets, investments and liabilities such as loans, to determine your net cash flow. Hopefully, the older you are the more you have in savings and investments with a positive cash flow.
If at this time you have a positive cash flow and continue to accrue savings and increase your investments, you probably do not need to worry about retirement costs. More so, if most of your cash flow is coming from recurring income such as interest, rent, royalties, dividends and other passive sources.
Alternatively, sitting on a huge pile of cash from the sale of an asset or inheritance will work as well. This is known as “LOI” or “Living On Interest.” The easiest way to calculate this is putting your cash in a monthly time deposit with a reputable and well established bank. Currently, placement rates will yield a net interest of 4 percent per annum so if you have P10,000,000 on hand you would earn P400,000 a year or P33,333.33 a month.
Your physical situation will also have a big impact on your retirement expenses. Having a disability or age related limitations will require more expenses for medicines, doctors, helpers, aides, drivers and other staff. Typically, your physical condition and expenses will not improve with age, on the contrary, it will get worse and require more attention.
Aside from the physical health, I have seen many people who have developed mental issues as they grow older, such as dementia which includes Alzheimer’s. Many retirees suffer in their old age not because they did not have enough money but because they did not have enough of their mental faculty to ward off their own evil children and relatives from taking advantage of the situation and steal their nest egg. With their assets and savings stolen, they are sent to a home for the aged to suffer neglect and a pitiful life, worse they are left uncared for till their death.
Being able to continue or even improve on the lifestyle you have been accustomed to is what we all hope for in our retirement. You can easily calculate all these expenses starting with your household expenses such as real estate taxes, association dues, utilities, groceries, maintenance, staff salaries and incidentals.
Other expenses such as maintaining your membership in country clubs, restaurant, entertainment, transportation and travel expenses can all add up and are cost you should be aware of and allocate for. It is possible to get health insurance to cover your unforeseen needs but this also requires the payment of premiums and while there is PhilHealth it most likely will be limited and insufficient.
Obligations for the education of your children, taking care of your parents and perhaps other relatives who cannot take care of themselves do not disappear as you get into your retirement. However, this is something you can prepare for by setting aside the money for what is needed or perhaps ending your obligation with them by giving them advance notice or enough time to manage their own affairs. At the end of the day, you will not be able to save everyone in need or in trouble, you will just have to prioritize and identify what is truly your responsibility and obligation.
Longevity is often overlooked in preparing the cost for your retirement. In the Philippines, the life expectancy for males is at 70.22 years and for women is at 74.17 years. Since many people work into their 60s and beyond, enjoying your retirement for just a decade does not seem too much. It would be nice to have a happy and productive life until you reach 100, and maybe that should be your mindset and goal. Naturally there are limitations on your ability to get gainful employment but if you plan well enough in advance, you could live off passive income and choose the people who you can trust and truly cares about you to manage your savings and well being in the event you are not longer able to take care of yourself.
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email georgechuaph@yahoo.com. Photo is from Pinterest.