Saving and Investing: Steps to achieve early retirement during high inflation

Retirement is not the end of the road. It is the beginning of the open highway.” –Unknown

What’s your target retirement age – 60, 50, 40? 

Even if retirement seems far off, it’s never too early (or late) to start planning. It’s especially important now because inflation directly affects your earnings, spending, and savings. After a while, inflation can devalue the worth of your retirement funds. 

In the latest Retirement Survey Report of Mercer, only 1 in 5 Philippine companies prepares their employees for retirement. To ensure your own retirement readiness, have a saving and investing plan in place – one that is inflation-proof! 

Early retirement is still possible as long as you understand how inflation may hurt your overall retirement strategy. It’s a plus if you have established good saving habits since day one of joining the workforce. Another route is through investments! Master saving and investing and you’ll be able to shave years off the traditional retirement age. 

We’ve compiled some practical steps so you can achieve early retirement. 

  1. Know your vision of early retirement. Get your vision boards out! Your retirement vision board is more than just a collection of pictures or clippings. It’s a preview of what your future life looks like. Defining where your goals will take you can help you actually achieve them.
  2. Compute your annual living expenses. In order to get a better sense of how much you (really) need to retire, you have to know how much you spend and save – start by calculating your recurring monthly expenses then add other expenses that are currently covered by your employer. Don’t forget to consider inflation when assessing future costs.
  3. Understand your retirement plan options.  Let’s discuss pension, a fully guaranteed government option. A pension plan will give you access to monthly allowances or the whole lump sum amounting to your total contributions. The Social Security System (SSS) is one of the most accessible pension plans in the country. It’s fairly easy to do because SSS contributions are mandatory and are salary deducted.

On the other hand, Personal Equity Retirement Account (PERA) is a voluntary retirement investment plan that can be availed through banks, insurance companies, or any other administrator accredited by the Bangko Sentral ng Pilipinas, Securities and Exchange Commission, and Insurance Commission. It is the Filipino equivalent of the 401k Contribution Plan or the Individual Retirement Account in the US. You can save and invest up to ₱100,000/year and earnings are tax-free!

Another investment fund method is insurance plans. Apart from the financial protection for you and your family, insurance is also an investment vehicle that has the potential to grow.  

  1. Pay off high-interest debts. Before you immerse yourself in building your portfolio, knock off outstanding debts that carry high interests. Saving for your retirement would be much easier if you don’t have any lingering debts. Create a debt repayment plan and commit to minimum payments for less expensive debts.
  2. Diversify your portfolio. According to financial planner Christopher Davies, “you need an investment portfolio of about 25 times your initial income requirement.” You have to spread your money in various assets to lessen the impact of any risk to your retirement portfolio. Other income-generating assets like real estate and pension could also speed up your plan of early retirement. With rising inflation, make sure you have enough assets that can secure and sustain your golden years. 

People are living longer and longer and don’t necessarily stop working at 60 or 65. This means, you have more years to cover in your retirement. Whether you want to travel or spend more time with your family, the more you plan now the better options you will have to achieve your dream of early and comfortable retirement. 

As your reliable Salary Finance Platform, SAVii’s 360-degree salary-linked financial solutions are available at your fingertips! Boost your retirement funds, pay for your bills, or settle your medical expenses through our affordable loan options. Apply now!