Retirement Planning

Isn't it too early? No, it's not! As soon as you start working, I hope that you save some of your salary for your retirement. We don't want to be a burden to our kids and grandkids when that time comes, right?

At the start of the year 2023, I was calculating how much we will gonna need for our retirement. When is it okay for us to retire? It doesn't mean that we won't work when that time comes, but work will be optional for us, or we can do something else aside from our main job (as programmers). If we don't want to work anymore, we should still be able to buy our necessities without asking for money. And that's what I computed to plan out our retirement.

How did I plan our retirement?

When can we retire? And for how many years of no work should we prepare for?

We will be over 50 years old when our kids graduate from a 4-5yr course in college (around 52 or 53 years old). We already have one VUL insurance for each kid to take care of their college education, but just to be sure, we will still be working until that time. So I figured we can retire at the age of 55. And if we will be given a long life, I was planning out how we will live for 30yrs more after our retirement.

How much do we need per month?

By the time we retire, I expect that we are already empty nesters, so we don't have responsibility/obligation to our kids anymore. And hopefully, they found jobs that they like and that pays them well (for them and for their future family). So the budget that I was aiming for is good for me and my husband only.

To live a comfortable life after retirement, I was aiming for a Php100k/mo living expense. But due to inflation (that's 23years from now), I'm going to make it Php 200k/mo. And that is only for the first 10years of retirement. And then, I plan to have Php 300k/mo for the rest of the retirement years.

Retirement Years	Amount / Month	Amount / Year	Total in 10 yrs
0-10	Php 200, 000	​Php 2, 400, 000	Php 24, 000, 000
11-20	Php 300, 000	Php 3, 600, 000	Php 36, 000, 000
21-30	Php 300, 000	Php 3, 600, 000	Php 36, 000, 000

Check investment money

Now that we have the numbers, I gathered all our VULs (not including our kids'), our Single Payment premiums, Mutual Funds, cryptocurrency and bank numbers. I tried to compute how much we will be getting in 23 years time.

For our investments, I assumed 8% annual interest. It is still no where near our goal (which is the amount we hoped to achieve when we retire).

I also computed how much money do we need to invest per month, still assuming 8% annual interest, so we can reach our retirement fund.

I was able to come up with a number, and we need to invest a huge amount of money per month so we can reach this goal. Honestly, it felt overwhelming when I saw the numbers. We might be able to afford saving this much right now, but that is difficult to maintain for 23 years! We don't know if we are still capable at that time, so that kind of scares me. I even thought of lowering our monthly, but I also thought that that was the numbers I've come up with to live a comfortable retirement life. So I also don't want to compromise.

But I told my husband that since we don't know the future, we will just save as much as we can, while we can (afford), and to not put so much pressure in ourselves. At least we know we have a goal in mind, and if the time comes in the future and we saw that we actually achieved that amount (or near that amount), we know that we can live comfortably and that we can now rest easy since we already have the retirement fund we needed.

But I found hope!

One day, I saw a Youtube video of Robert Kiyosaki mentioning that 80% of his investments are cash flows and 20% are capital gains. I didn't understand what those terms are, so I looked up another video explaining the difference between the two.

Capital Gain

When you buy an asset (example, a stock), sell it later for a higher price and earned a profit, that's capital gain.

Cash Flow

When you get an investment which you will hold for a long time, and that investment returns money back to you every month, or every quarter, or every year. As a simple investor, the first thing that comes up to my mind is the term dividend.

I got really interested in Cash Flow. I started looking for more videos about living off of dividends, but I think this is really not for everyone. You can live off of dividends if you actually buy and hold a lot of stocks that yields dividends. That'd mean millions, and I'm not talking about 1-2M. Here's a video I found on Youtube by Tiyo Pilo about how much you'll need to invest to earn Php 100k/mo in dividends.

But in one of his examples, to earn Php5000/mo in dividend (with a dividend rate of 4%), you'll need to invest Php1.5M. Imagine how much you'll need to invest to earn Php100k/mo in dividends. And the key is to look for assets that give big dividend rates.

Also if you buy stocks that yields dividends, you are hitting 2 birds with one stone - Capital Gain and Cash Flow. Because those stocks can still increase their value over the years!

So now, my goal is to look for Philippine stocks that pay out good dividend rates and has high potential of increasing in value after how many years. Here's another reference video on Youtube by InvestingPH. He explained well how he chose his stocks, and also why he recommended such stocks, most of which is that it gives good dividends, and are also undervalued.

Can also talk to the bank!

I also saw one of the comments in Tiyo Pilo's video that if you have 30M, you can just talk to the bank and they can "easily" give you Php 250k/mo. In his comment, he was referring to BDO bank. So that's another option, too! But let's look for Php10M first (which is the minimum amount to open a private bank account). It really is not for everyone! But it's good to know that we have several options to choose from.

Other options:

Other people also suggested to put your money in PAGIBIG's MP2 with a dividend rate of 6% last 2021 (but there's a lock-in period of 5yrs which is really long, but not that long if you plan to use after 23 years).

Or you can also check out eToro's QYLD wherein you invest in US market with a dividend rate of 12.81% last 2022.

The key is to really look for assets that give big dividend rates. It's exciting because there are so many ways to earn passive income!

Disclaimer:

Please remember this is not an investment advice. I am only sharing what I have learned the past few weeks and how wonderful Cash Flow is.

Don't put all your eggs in one basket! Just don't be greedy and don't invest money you cannot afford to lose.