It’s start as a soft whisper during your early working years, a gentle reminder when you started your family and slowly creeping dread when you reach middle age. Retirement comes for those who reached the age but you don’t have to dread it, it should be something that you look forward to; after decades of backbreaking work this is the time that you seat back and enjoy the fruits of your long labor. Well, that is, if you planted something.
It’s quite obvious but most of the time it’s needed to be said: the best time to prepare for retirement is when you’re still young and able.
You may ask “How much would I need for retirement?”
Get an estimate of your annual expenses, for example, if you spend for yourself 20,000 pesos a month, that equates to 240,000 a year.
Factor in the inflation and the number of years until your target retirement age. If you’re 30 years old now and you plan to retire by age 65, you still have 35 years to prepare. Let’s say the average inflation would be 3% per year, you could get your annual retirement expense at age 65 by this formula:
retirement annual expenses = present annual expense X (1 + inflation rate) ^ years until retirement
retirement annual expenses = 240000 (1 + 0.03) ^ 35
retirement annual expenses = Php675,327
and that’s only for 1 year! Nobody could tell how much long we shall live after retirement but say we prepare for 15 years of retirement. You could still factor in the inflation but to simplify let’s just multiply this number by 15. That’s about Php10,130,000.
Before we continue please note that you left your mouth opened in surprise. Pakisara muna, besh.
That’s only an estimate as your lifestyle may change as the years go by or you adjust your retirement age so it could be a constant changing value but why we’re doing this is because you need a target number, something you will aspire to achieve and I feel you if you’re shocked and overwhelmed but this should not deter you to start planning for this. Fortunately, there is a lot of ways you could prepare. You could build your retirement fund by regularly investing part what you earn now and in the future you’ll realise that 10M is very possible.
Now you know your “Magic Number”, how do you get there?