Assume you’re over 50, and you don’t save enough money despite being well-paid as an Overseas Filipino Worker (OFW). Isn’t it a harrowing experience? A retirement plan is a critical and necessary component of becoming financially independent.
After all, the goal of a retirement plan is to ensure financial security even after you stop working abroad. You have been working for years, away from your loved ones, so, naturally, you will enjoy your retirement days.
Unfortunately, many OFWs are not ready to return permanently to the Philippines. This is due to a lack of retirement savings and the fact that they do not have concrete financial plans for their future retirement. Furthermore, some OFWs who return home still need to find a new source of income and cannot survive on their pension income.
What is retirement planning?
Retirement planning entails preparing for your future life today so that you can continue to meet all of your goals and dreams on your own. It also refers to financial strategies of saving, investments, and ultimately distributing money meant to sustain oneself during retirement.
Every retirement strategy is distinct. After all, you might have very specific plans for how you want to spend your retirement years. This is why it is critical to have a program that is tailored to your specific requirements.
Why do OFWs need to have retirement planning?
You’ll keep spending money.
The retirement issue is that your living expenses continue even after your monthly paychecks have stopped. When you get older and your health deteriorates, you will require regular medication, food, and utility payments. If you have a pension or a reasonable source of passive income when you retire, you shouldn’t have to worry about those expenses.
Children are not retirement replacements.
The most common reason OFWs send remittances to elderly parents is that they have not planned for retirement age. Why? Because they lack stable employment to meet their financial needs. Unfortunately, the children of OFW may become their parents’ retirement accounts. While it’s a beautiful opportunity to provide financial assistance to your loved ones, over-remitting can jeopardize an OFW’s retirement savings plan.
Before nearing retirement age, set your retirement fund or financial goals if you don’t want to become a burden to your loved ones and break the cycle. Don’t let your children become your future retirement plan. Remember that assisting yourself in becoming financially stable simply means assisting your loved ones.
Being a burden to family members
Nobody wants to be a burden on their family. While the majority of our elderly do not have pensions or personal savings, it is quite common for someone to rely on extensive financial support and care from extended family. If you live too long, you will need to have enough savings to meet your needs in old age. As a result, most OFWs are concerned about securing their future financial situation. Failure to have a retirement plan can cause emotional stress and financial burden to your loved ones. In other words, aside from your personal needs such as food and utilities, they will have to worry about your medication or hospitalization, especially if your health is not in good shape.
Despite your age, you may be required to work longer hours.
When you reach retirement age, the challenge is figuring out how to live when you are no longer physically fit to work. We’ve heard countless stories about OFWs who are already 50 or 60 years old and are required to extend their contracts even if they want to return home permanently. This is because they either do not have enough savings for themselves or have family members who rely on them financially.
Guide to Early Retirement Income and Planning for OFWs
When would you like to retire?
Are you planning to work until you’re 65 or until you’re older? Do you intend to retire early? How many more years you intend to work has a significant impact on how much money you will need. Working until you are older not only gives your investments more time to grow but also reduces the number of retirement years you need to fund slightly.
Know Your Post-Retirement Requirements
Everyone’s needs will differ during retirement, but there are a few constants in life. Food, shelter, and healthcare are examples. Future medical expenses are usually prioritized because they tend to rise in retirement. However, if you are still young, you can reduce your medical costs by starting to take care of your health today.
In addition to the necessities, your retirement expenses should include your desire for travel or entertainment. Consider the type of lifestyle you want after you finish your career, and make sure to save for a life that does not compromise your sense of comfort. Open a retirement savings account as soon as possible. When your employer-sponsored retirement plans or government retirement funds are depleted due to your daily needs, this will serve as your emergency fund.
Real Estate Investing 101
Aside from funding retirement contribution from the government and privately owned companies, you should also consider investing in properties. Real estate can assist you in a variety of ways during your retirement. You can repair and resell a property, purchase a commercial unit and start a business, or buy a home and build equity. The third suggestion is one of the best ways to begin investing in real estate.
Purchasing and paying off a home will prepare you for retirement. If you own your own home now, you won’t have to worry about rising rents when inflation hits. A house, depending on its location, can also help you build wealth, especially if it is used as a rental property or resold in the future.
Determine the Best Investment Mix
As you progress in your investing career, you may want to consider other money-making avenues, such as stocks and bonds, depending on your risk tolerance. Your specific investment mix should change as you get older. Remember that what worked in your twenties or thirties may not provide the returns you desire in retirement.
Meanwhile, if you work in a high-paying overseas job, consider the investment benefits of starting your own business. Running your own business can provide you with the opportunity to earn an unlimited income regardless of your age.
Make Your Savings Automatic
Pay yourself first and automate the process to achieve your financial goals. Paying yourself first entails saving money before paying bills, whereas automating entails setting up monthly transfers to your savings account. This allows you to invest your money wisely and avoid the temptation to overspend.
Similarly, purchasing a home ensures that a portion of your income is invested first. When you pay off your mortgage, you will receive savings in the form of home equity and own an asset that you can pass on to your children and grandchildren.
Planning your retirement strategy is important, but it is not something to be concerned about, especially if you begin early. The same adage applies to investing as it does to planting a tree, with the best time being 20 years ago and the second best time being now.
You can seek the advice of a Certified Financial Planner or another qualified professional if you need help determining your ideal asset allocation, estimating when you can retire, planning your retirement income strategy, tax deductible and taxable income that might arise, or any retirement goals you have in mind. The important thing is that you take retirement planning seriously and begin immediately.