50 is a milestone in anyone’s life. Turning 50 tends to be a wake-up call for many pre-retirees. And with roughly a decade or so until retirement, it is important to understand the effect of timing on an investment plan.
I received quite a number of emails telling me the same thing:
“I’m in my 50’s, I don’t know if I have saved enough for retirement. Do I still have hope?”
“I’m nearing 50 and I only have SSS for my retirement plan, is that enough?”
“I’m in my late 40’s, I have saved a few, how can I maximize what I have so that I can retire and still not depend on my children in the future?”
First in foremost, there is still hope. Do not lose any hope.
But from the moment you realized you are LATE in saving for retirement, you need to know that everything should be done in double time because time is not on our side anymore.
There are things you need to know in planning for Retirement late, and these are:
1. Time and amount money saved are both inversely proportional. Meaning, the lesser time you have, the more money you need to save and invest.
Compounding interest, don’t have much time to work its magic. Don’t expect that you can invest a small amount of money and you still get the same results when you started 20 years earlier.
2. In your 30’s or 40’s, if you started saving and investing, and your investments dipped, you have a little bit of time to make up from what you have lost. But at age 50, you cannot afford to lose. You simply don’t have time on our side anymore. A safer investment vehicle would be more likely to work.
3. But when it comes to safety, savings banks and even time deposits are still never safe. At most, it gives only 1% annual return, versus inflation rate which is still at an average of 4% per year. It is a 100% sure-fire way to lose your hard saved money. Save in investment vehicles that gives 2% or higher return than inflation. That is safe.
4. Big bulk investments, single pay investments are good for start –up and will get your investment an initial boost. Then continue adding as TOP-UP to your initial investments to make it grow faster. Some examples of companies where to invests:
a. Single-Pay Investments with Insurance (Insurance companies) – this is better if you want your assets protected against estate tax issues in the future, while it is earning 8-20% or more, just make your beneficiaries irrevocable. This will make your asset more liquid in time of death and also make the benefits tax-free for your beneficiaries. (this will be further discuss in Estate tax topics in the future posts)
b. Mutual Funds (Mutual fund companies) – just make sure you put your funds in the more secure part of the funds unless you like to take in more risks.
c. Invest on your own on stock market. But be sure you study first where to invest. Remember, at this stage of your life, you can’t afford to lose anymore.
6. But before investing, the most important thing is, PLAN first. If you don’t know how, get some expert advice from financial experts. Not from a friendly neighbor, family friend, parents or your spouse. Remember, time is not on your side anymore, if you will be lead by a wrong advice, you may not have time anymore to bounce back. That will be not good in your already-late-retirement-plan.
7. Things you need to consider in late retirement planning, and things your retirement planner needs to take into consideration: (these are the things I usually ask)
- Your present age?
- Age you plan on retiring?
- Lifestyle you want (how much you want to receive per month if you are to retire now (in pesos)?
- Benefits you will be receiving from government, company or any institution you are entitled to receive when you reach the age you plan to retire?
- How many more years you are planning to save/invest for retirement? and when do you plan to start?
- What is your risk appetite in investing?
Before you get sad from hearing over and over that you are LATE, let us look at the brighter side of things to cheer you up a bit.
With age comes clarity and that clarity might be your greatest advantage in retirement preparation. When you reach 50 and beyond, you can create a clearer picture. At age 50 we have a pretty good idea of what our financial lifestyle goals look like 20 to 30 years down the road.
Mortgages, child expenses, college expenses may all decrease or even stop since you may have finished few years ago, so there are more room in your budget.
With age comes wisdom and using this wisdom to your advantage, age can still bring you a successful retirement plan.
May you have a Happy Retirement Planning!
Do you want to get some expert help in your late retirement plan? Send me an email here.
Want to more on retirement?
Few more good reads:
- SSS Retirement Benefits, Updated 2014 Is it enough for your Retirement Needs? Find Out now!
- How much should you be saving for Retirement? Do you have what it takes to retire comfortably?
- The Filipino Retirement Scenario, Find Out Where will you Belong in the Future
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