Retirement plans for millennials can be cheap

Published September 23, 2018, 12:00 AM

by manilabulletin_admin

By Chino Leyco

It’s not surprising that tech­nology is moving at an ex­ponential pace in the past decades, making more and more Filipinos, particularly the young ones, exposed to all kinds of information — fake and accu­rate ones.


Let’s admit it, social media posts about gadgets, food, trav­els, celebrities, among others are enticing, but a discussion on financials may not be so sexy for the youth.

Topics regarding investments, retirement and in­surance won’t excite the “YOLO” mindset of millennials.

The acronym for the phrase “you only live once” (YOLO) is often used by millennials as a hashtag on social media to bring attention to exciting events. Cer­tainly, this slang phrase is not applicable to financial matters.

Asked what they want to become maybe around 40-years from now, these millennials will surely answer they envision to have a good and comfortable retirement.

But did you ever wonder if these young profes­sionals really set aside money to prepare for it?

Well, based on the Manulife In­vestor Sentiment Index, Filipino millennials are overwhelmingly optimistic about their retirement as about 97 percent of the respondents claimed that they expect that they can maintain their cur­rent lifestyle or even better when they get older.

It is ironic that while they are overwhelmingly optimistic about their future, only about seven percent of millennials really set aside a portion of their monthly income for savings.

One indicator why financial planning is not a priority among millennials is the Philippines’ very low financial literacy rate. Did you know that less than 20 percent of the household heads in this country have insurance?

And only about 10 percent of Filipinos actually prepare for retirement?

Maybe, Filipino culture is somehow at fault why they do not prepare for retirement. According to the Social Security System (SSS), a government-run pension fund, over 70 percent of senior citizens live with and are being supported by their children.

These are just a few among many issues why Filipinos are not inclined to prepare for retirement. Another misconception is that financial planning
is costly and only for those “can afford” individuals.

But according to SSS, preparing for retirement is cheap.

If the individual is an employee in the private sector, he or she is automatically a member of the SSS and contributes to the fund on a monthly basis. When self-employed, the individual should voluntarily remit to the financial institution.

The member’s contributions become the savings for the future that will serve as basis for the granting of social security benefits.

Recently, SSS introduced a voluntary provident fund that gives more opportunity for its members to save more at a very affordable cost in order to receive additional benefits in the future. An initial contribution of only P1,000 is required.

Dubbed as “SSS Personal Equity and Savings Option” P.E.S.O. Fund, this facility is open to all SSS members in addition to the regular program.

Its earnings and benefits are tax-free, contributions are placed in government guaranteed investments, and earnings are assured.

The program is open to all employees, self-employed (SE), voluntary (VM) and overseas Filipino (OF) members who are below 55 years of age; have paid contributions regularly; and have not filed any final claim under the regular SSS program.

Contributions to the P.E.S.O. Fund may be made anytime, whenever the member has excess funds. SE, VM and OF members, meanwhile, must have regular SSS contributions assured.

PESO Fund is open to all SSS members in addition to the regular program. Its earnings and benefits are tax-free, contributions are placed in government guaranteed investments, and earnings are based on the maximum Monthly Salary Credit (MSC) on the month of payment before they can contribute.

Each member shall be allowed a maximum contribution of P100,000 per annum and a minimum of P1,000 per contribution.

Based on SSS estimates, a P.E.S.O. Fund member who contributes P100,000 per year starting at age 40 will have contributed a total of P2 million by the time he reaches age 60.

Assuming that the fund growth rates are at 3.75 percent, 1.85 percent and 1.85 percent per annum (may be higher or lower) for Retirement Account, Medical Account and General Purpose Account, respectively, the member would earn P500,000 in 20 years, giving him a total of P2.5 million upon retirement.

In comparison, if the member placed his P2 million in a bank with an average savings interest rate of 0.45 percent per annum (net of tax), his deposit would earn P100,000 in 20 years, giving him a total of P2.1 million upon retirement.

However, no withdrawals are allowed from the retirement/total disability account and withdrawals within the five-year retention period shall be charged with corresponding penalty and service fees. Interested and qualified SSS members can enroll in the program over-the-counter at any branch.

Aside from the government sector, several private financial institutions are also offering products that could cope with the rising cost of elderly care, which are very suitable to young professionals, or millennials.

Like for the case of Sun Life, where millennials account for 70 percent of its clientele, it offers life insurance plans that provide peace of mind and enable individuals to build a fund for their golden years, gone are the days when regular pension can cover all retirement needs.

In a bid to help young Filipinos, become more financially prepared, Sun Life Grepa Financial introduced in October 2017 a program meant to help millennials prepare for a prosperous retirement without hindering their present priorities.

Dubbed the “Millennial Now, Millionaire Later” program, young millennial Filipinos just starting out can choose from three different program tracks — Normal Track, Fast Track, and Safe Track — to help build funds starting from as low as P100 a day.

Each program track provides life insurance benefits starting from day one so that millennials are ready for life’s uncertainties that may come their way.

Other retirement products being offered by Sun Life are Sun MaxiLink Prime, an investment-linked life insurance plan that offers a combined benefit of insurance protection and investment; SUN Smarter Life Elite, a protection and savings plan that provides double life insurance coverage.

There are also the Sun Acceler8, which is a protection and savings plan that matures after 20 years; and Sun FlexiLink, an affordable investment-linked life insurance plan perfect for the budget-conscious, but forward-looking Filipinos.

Other peso and dollar-denominated investment-linked life insurance plans that offer a combined benefit of insurance protection and investment are Sun FlexiDollar,
Sun MaxiLink Bright, Sun FlexiLink1, Sun FlexiDollar1, Sun MaxiLink One, and Sun MaxiLink Dollar One.

Retirement is a time to enjoy all the things you never had time to do, this is a belief of Philippine American Life and General Insurance Co. (Philam Life), that’s is why it is offering arrays of products suitable for millennials who are budget conscious, but want protection.

But Philam Life has adopted a different approach in marketing its retirement products by encouraging its customers to make better decisions that contribute to their overall wellness, and rewarding them along the way.

Healthy living

A recent study showed, the Philippines’ ranking in the Healthy Living Index declined last year despite Filipinos’ greater awareness about the various health risks of their unhealthy habits and poor lifestyle choices.

The country’s rank in the Healthy Living Index plummeted to the 9th spot among 15 Asia-Pacific nations.

The Philippines’ poor health situation led Philam Life shift its focus to improving the quality of life of every Filipino through health and wellness efforts such as the Philam Vitality program, which was introduced by the company in 2015.

Under the Philam Vitality program, Philam Vitality Age will be first gauged to show how well he or she lives. After that, they will be given weekly challenges that they can accomplish by completing a certain number of steps as measured by a fitness device or free fitness app.

For every challenge successfully completed for two consecutive weeks, users will receive rewards such as free passes to SM Cinema, SM Ice Skating, SM Bowling, Blink, and Exploreum.

By positioning insurance in the space of “living better,” Philam Life believes the program will help Filipinos be more comfortable
with getting themselves insured for the future.

The savings products being offered by Philam Life include MoneyWorks, a unit-linked savings plan where benefits are connected to the performance of your chosen investment fund and a lifetime insurance coverage.

There is also Philam Life’s Future Protect, which can take care of future needs. It’s a plan for you when you grow old, or for your loved ones to remember you by should the unexpected happen.

Lastly, Philam Life offers Active MoneyWorks, which is powered by Philam Vitality. Aside from regular insurance coverage like accident and critical illness, it also gives access to a health and wellness program along with discounts from a wide range of healthy living partners.

Start now!

There is never a bad time to start planning for retirement, no matter how early or far along the professional journey is, but the rule is to start as soon as they can, says Manulife Philippines, which also has tailored fit insurance plans suitable to the unique financial needs and budget of every Filipino.

Like for example, the Manulife Freedom, a short-term to long-term insurance plan that helps individuals to reach financial goals, whether it’s saving up for an out-

of-town vacation or preparing for a comfortable retirement.

This insurance plan provides guaranteed cash payouts benefits, with built-in insurance coverage for family’s security.

They also have the Manulife Affluence Builder, an affordable investment and life insurance plan offering financial protection for the family while optimizing potential returns for investment.

In this family life insurance and investment plan, there are various fund options to help determine the highest potential returns possible based on individual’s
risk profile.

Understandably, preparing for retirement is never an easy feat, especially many would always want to have not just the most comfortable but also the best possible life in the future. For this reason, they need to work hard and save harder, always willing to sacrifice when needed.

But there’s a solution to address all financial woes and ultimately, give them a brighter, better future.