Your monthly contribution for your future pension is one good way to prepare for your retirement but it’s not enough. Even when planning for your retirement, it is important to predict possible scenarios that might happen to you.
Monthly Pension in the Future Calculated
Let's try to picture this scenario: Assuming your pension was at 2 million pesos from your contribution. Let's say you retired at the age of 60 and the estimated distribution of the fund will cover 20 years since the age of retirement.
So 2,000,000.00/20 years= 100,000.00 annually or 8,333.33 monthly. You now enjoy the benefits of receiving 8k per month for 20 years. In other words, your pension will all be consumed at the age of 80.
Assuming a Life Living up to 100 Years Old
But supposing you were not yet called to leave earth and you will have to live up to additional 10 or 20 years? Where will you get money to sustain your needs for life survival?
If you also think of the benefits you’ll receive from age 61-80 is a big help, just think of the inflation rate or the increase of prices of goods and commodities within these years. Think of the goods and commodities that can cover your 8,000.00 monthly pension. Remember that the price of product now is different from its price five years ago.
Even think of the cost of your medicines.
We know the fact that reaching old age is also reaching the age of physical and mental deterioration. By looking at the time you retire, do you think the price of medicines will be the same as now?
How will you address such problem? Will you work at the age of 81 and up (at that very old age?)? Will you be dependent to your child/children who have their own families to feed?
The Answer is Insurance
To prevent such future scenario, I recommend my clients to try applying for a variable unit-linked life insurance. In this way, you'll not only be insured but also your premiums will be used as investment. Many insurance companies also provide insurability period of up to 100 years old so in case your pension is not enough, let your life insurance cover more. Approach a financial consultant for this. Ask and you will never have regrets for your financing needs in the future.
Emergency Fund is a money set aside from your own salary or income to cover unexpected expenses. Many financial planners would even tell you that the very first thing to save is to allot it for your emergency fund..
Financial literacy, in its simple terms, is the ability to make appropriate decisions in relation to managing your personal finances. This article provides some tips to increase financial literacy..
Long-term care insurance is a type of insurance that offers protection to an individual on the expenses that arise when he/she needs long term assistance or care due to the inability to perform basic daily activities. This article brings to life everything you need to know about long term care insurance..