Retirement Alternatives to SSS Pensions

by Bea Bongat, on category "Local News,Money Matters,Personal Finance"

October 14, 2015

Alternative to SSS Pensions
In June 2015, the House of Representatives approved on its third and final reading House Bill 5842, which seeks a Php 2,000 increase in monthly Social Security System (SSS) pension. Around two million Filipino pensioners will benefit from the approval of this bill once is it passed into law with the concurrence of the Senate and then the President.
However, a Php 2,000 increase will cut the fund life of the SSS by 13 years, according to SSS officers Marissu Bugante and George Ongkeko Jr. If that is true, then those retiring after 2029 may face the risk of receiving no pension at all.
However, those retiring earlier than 2029 shouldn’t rest on their laurels. The highest monthly pension an employee can receive is around Php 13,000; the lowest is Php 1,200. The Php 2,000 hike will be beneficial to pensioners; however, even the highest monthly pension won’t serve as a sustainable retirement fund.
SSS pensions serve as extended financial assistance. They are not meant to be a person’s entire retirement fund. As early as now, it is best for Filipinos to look for multiple streams to fund their retirement. Here are 3 alternatives to SSS pensions:

Savings Accounts

The greatest benefit a savings account provides is liquidity. Liquidity is the measure of the amount of cash a person or organization has to meet short-term obligations. In simple terms, it’s how easy an entity can convert its assets into cash. Unlike real estate where it can take years to sell a property and earn money, a savings or checking account provides outright cash, thus being highly liquid.
It is important that come retirement, Filipinos have a well-padded savings account to meet immediate and emergency expenses. However, too much of everything can also be bad, and it is suggested to only store around 6 months’ worth of living expenses in highly liquid accounts. If the bulk of your money is in liquid investments, you run the risk of losing money due to inflation since Philippine savings accounts only provide an annual return between 0.25 and 1%, much lower than the country’s year-to-date inflation rate of 4.1%.

Real properties

Filipinos prefer to invest in real estate than stocks and bonds. 70% of Filipinos own their homes, according to a survey conducted by the Bangko Sentral ng Pilipinas, while less than 1% invest in stocks, bonds, and government securities. Real estate is another source to generate income, be it from renting, buying-and-selling, and long-term investing.
Since real estate is a big-ticket item, earnings from property renting and selling can be a good source of income come retirement. Compared to the Php 13,000 monthly pension limit, earnings from real estate can surpass said pension. Here are three ways to make money from real estate investing.

Paper Assets

Paper assets include stocks and bonds, and they are one of the best ways to reach one’s retirement goals. Unlike savings account when annual returns are limited to 1% or less, returns on investment (ROI) from paper assets can vary from 3% (e.g. lower-risk investments such as bonds) to as high as 40% or more (higher-risk investments such as stocks). Paper assets enable investors to beat inflation and grow their net worth at a faster rate. However, it’s best to note that the most profitable investments pose high risks, and investing blindly can lead to losses. It’s also worth noting that stocks and similar investments are best for the long-term, which make them ideal for stashing away your retirement funds.
In an interview with, Marvin Germo, author of the Stock Smarts series of books, advises investors to “never invest money they cannot afford to lose” because investments are not guaranteed. To get the most out of investing, you need to educate yourself on your options; start by reading up these articles on investing for beginners.
To maximize your retirement fund, it’s best to leave your money in investments for a minimum of 5 years, and not to touch it until your retirement. This allows you to ride out any market fluctuations and keep growing your money over the long term.

The importance of a retirement fund

Many look forward to retiring because that’s the perfect time to pursue your hobbies and simply enjoy life. There’s no need to report to work and spend half the day holed up in the office. Retirement is when you have the most free time in you hands; however, with more free time, you run the risk of spending more, and so you need a healthy retirement fund.
Having a retirement fund allows retirees to live their dreams, whether it’s retiring on a beach or enjoying daily lunches with amigas at the nearby mall. With the Php 13,000 monthly pension limit, it can be difficult to live out one’s dream retirement, so it’s important that one starts saving and investing early on using the three alternatives above. And for more tips on saving for a great retirement, check out the 5 Retirement Planning Mistakes You Should Avoid.