Retirement planning 101: The basics of enjoying the latter years of life
By Jomarc Angelo M. Corpuz, Special Features and Content Writer, BusinessWorld
All roads lead to retirement. After graduating from college, working for decades, and climbing the career ladder, most Filipinos eventually retire to rest and reap the fruits of their labor. While that phase of life may seem distant, it is actually one of the most important stages to prepare for as early as possible.
According to a survey by World Finance, Filipinos believe that savings equivalent to 2.1 years’ worth of personal income is enough for their retirement, a few months below the regional average of 2.9 years and a few years off for those who opt to retire early. In the Philippines, the optional retirement age currently stands at 60 years, with the mandatory age set at 65. While the numbers are still impacted by deaths during the pandemic, the latest data from the World Health Organization shows the country’s life expectancy to be at 66.4. This means that Filipinos would have to fund between 1.4 and 6.4 years of retirement after leaving their main source of income.
“Many Filipinos are still underprepared for retirement. A large number rely on family support, limited savings, or mandatory benefits alone. The challenge is not just income, but also delayed planning and low awareness of how much preparation retirement really requires,” Raymund Benedict C. Zalamea, President and CEO of leading retirement consulting firm E.M. Zalamea Actuarial Services, said in an e-mail.
“In general, Filipinos are ill-prepared for retirement, and there are many factors contributing to this. Among other factors, first and foremost, we are a spending economy; we spend most of what we earn and even money that we have not earned yet,” Rafael G. Ayuste, Independent Director of the Bank of Commerce, added.
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The realities that Mr. Zalamea and Mr. Ayuste mentioned go to show the urgency of financial preparation and reinforce the need to begin planning for retirement as early as one starts earning to ensure long-term security and stability during retirement.
“Ideally, people should begin as soon as they start earning. Starting early gives savings more time to grow and makes the discipline easier to build. In retirement planning, time is one of the biggest advantages a person can have,” he explained.
Meanwhile, despite the clear advantages of starting early, Mr. Ayuste explained that financial realities and competing responsibilities often delay retirement planning for many Filipinos until later in life.
“We have to be realistic; that is not likely to happen in the Philippine setting. In addition to the reasons cited above, the Philippine salary base is low compared to the rest of Southeast Asia. Realistically, if one is looking to retire at age 60, then the earliest one can start saving for retirement is at age 40, after most of the family obligations are settled or partially settled and income has grown to a comfortable level,” he said.
Expounding on starting retirement planning early, Mr. Zalamea notes that the foundation of effective retirement planning lies in developing sound financial habits early on that allow young and retirement planning Filipinos to save for their later years.
“The first steps are financial awareness, discipline, and consistency. That means learning to budget, avoiding unnecessary debt, building an emergency fund, and setting aside savings regularly, even if the amount is still small. Retirement planning starts with good habits,” he said.
Building on this emphasis on early habits, Mr. Ayuste shared that the next crucial step is to translate financial discipline into a clear and purposeful retirement plan.
“Time is the greatest advantage of the young, because compounding works best when given many years. Retirement planning is not something that begins in your 40s or 50s. The earlier you start thinking about it, the more choices and freedom you will have later in life,” he said.
Similarly, Mr. Zalamea also highlighted that the principle of retirement planning is a continuous process that requires discipline and awareness rather than a single endeavor. He stated how, over time, consistent financial habits and informed decisions will eventually lead to building long-term security.
“Starting early, staying disciplined, and building financial awareness are very important. Budgeting, debt management, emergency savings, and continuous financial education all play a role. In many cases, retirement security is built not by one big decision, but by consistently practicing good habits over time,” he added.
Alongside building strong financial habits, Mr. Zalamea also pointed to the need to consider the social and cultural factors that influence retirement planning. With the Philippines being a family-oriented society, he emphasized the importance of balancing personal financial security with the Filipino tradition of supporting one’s family.
“Supporting family is part of Filipino culture, but people also need to prepare for their own future. The goal is balance. People should help where they can, but also maintain boundaries, follow a budget, and continue building their own retirement fund. Preparing for one’s own retirement is also a way of protecting the next generation from future financial burden,” he said.
Reinforcing this balance between personal responsibility and family obligations, Mr. Ayuste emphasized the importance of discipline in navigating the financial pressures faced by many Filipinos, particularly those supporting both older and younger generations.
“Being part of the sandwich generation is a very real and personal situation for many Filipinos. If there is one piece of advice, it is discipline. Discipline means learning to distinguish between needs and wants, and having the courage to say no to wants… The goal is balance: caring for loved ones while still setting aside resources for retirement. Because in the end, preparing for our own retirement is also a way of protecting our family from financial burden in the future,” he said.
These considerations become even more pressing when viewed against the country’s shifting demographic landscape. At present, the Philippines has around 7.6 million Filipinos aged 60 and above. In 2032, this number is expected to rise to nearly 9 million or 7% of the populace, making the country an aging population. This only means that more people would have to rely on their savings and other institutions to fund their retirement.
The Philippines’ Social Security System (SSS) provides a monthly pension ranging from P2,200 to nearly P30,000 to retirees, depending on reforms.
“The SSS and the Government Service Insurance System (GSIS) are important because they provide a foundational layer of retirement support. For private sector employees, retirement benefits under RA 7641 add another layer,” Mr. Zalamea said.
Despite the presence of these institutional support systems, gaps in retirement funding remain a significant concern for many Filipinos. Mr. Zalamea said this backs the importance of strengthening personal savings and investment strategies alongside existing benefits.
“However, even taken together, these are often still not enough to sustain the kind of retirement most people would want. That is why personal savings and investments remain very important, especially when started early and allowed to grow through compounding,” he explained.
“For most, the private sector SSS pension alone will not sustain a comfortable life at retirement. Reduction in expenses at retirement does not take effect immediately, it happens gradually. By the time expenses are substantially reduced, the heathcare expenses kick in. Filipinos, without a doubt, should prepare additional savings or investments as part of their retirement planning,” Mr. Ayuste mirrored.
Given these limitations, Mr. Zalamea emphasized the importance of turning financial awareness into concrete action. He noted that starting early, even with small and consistent steps, can significantly improve one’s chances of achieving a secure and sustainable retirement.
“Retirement planning should not be postponed. You do not need to start big, but you do need to start. Small and consistent steps taken early can make a meaningful difference later in life. The important thing is to move from awareness to action,” Mr. Zalamea said.
This article appears on the latest BusinessWorld In-Depth’s special edition with the Trust Officers Association of the Philippines for Trust Consciousness Week. To get your free copy, go to https://bworld-x.com/product/free-beyond-today-a-modern-strategy-for-retirement-planning/.
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