Career and Wealth: Saving for Retirement – It’s Not Too Early

Before you say, “What the heck, I’m still in my twenties! Why do I need to save for retirement this early?”

Let me enumerate the reasons why you should save for retirement the earliest time possible:

1. The earlier you save the more money you’ll get when you retire.
Even your small investments, given time, will grow into a substantial amount of money – this is the magic of compounding.
2. You can invest on equities and the stock market which can give 30% of interest a year. Being young would mean you can take more risk when it comes to investments. The interest you earned can reinvested which would mean a higher principal and a bigger return.
3. Your retirement savings can serve as your emergency fund. When something unexpected comes up like sickness and sudden unemployment, it’s good to have something stashed away.
4. It will give you a good credit rating. It will come in handy when you are applying for a car loan, house loan or a personal loan.
5. You can’t count on social security when you retire. More people are retiring nowadays and it is placing a strain on the social security fund. It is not unimaginable that one day retirees won’t be able to get their pension checks.

Saving in your 20s is not only advisable, it is a must. Have you heard of people who were forced to retire and are out on the street looking for work? If only they saved early enough they could be enjoying a beach holiday in the Maldives or taking a tour of Europe.

According to Denise Appleby, a retirement consultant, saving early on in your career allows you to decrease the amount of savings you need than if you save for retirement later.

Let’s say you are 25 years old. you target to have at least 1 million pesos worth of savings when you retire at the age of 60, which is 35 years away. When you start saving right now you need to put aside at least 2,280.05 pesos each month to reach your goal. When you put this off until you are 35, you need need to save 3,333 pesos a month.

In starting your retirement savings, you could sign up for a fund transfer service from your payroll account every payday. You can have a bank deduct an amount you specify and place it into another account each month. This way your saving is automatic and you’ll be forced to make do with your remaining fund in your payroll account. The Bank of the Philippine Islands has this kind of service. You can call a BPI branch nearest you to inquire about this service.

The amount you saved in your retirement can go into mutual funds and the stock market since you are more or less averse to risk in a young age. Choosing the type of investment for you depends on the level of commitment and the expertise you have.

If you have the time and expertise to go through stock tickers, annual reports and technical analysis, you can invest in the stock market. The site provides great insight on the Philippine stock market.

But if you prefer to leave it to the experts, you can invest in mutual funds or UITFs. The Trust Officers Association of the Philippines has set up a website if you’d like to know more about this specific type of investment.

Saving each month for your retirement is just a small part. You need to have the discipline to stick to your goal and review it regularly.

If you’d like to share your investment techniques please feel free to leave a comment. Thank you.

US Department of Labor

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