Securing your future

PICTURE this: You've worked hard your entire life, dreaming of the day you can finally retire and enjoy the fruits of your labor. But instead of traveling, spending time with loved ones or pursuing your passions, you find yourself worrying about how to pay for basic needs. Sadly, this isn't just a hypothetical scenario — it's the reality for 80 percent of retiring Filipinos. According to then-Bangko Sentral ng Pilipinas governor Benjamin Diokno, "The harsh reality is that 8 out of 10 Filipinos ages 60 and above — and in many cases, retirees — do not receive sufficient pension to fully cover their living expenses."

This isn't just a statistic; it's a wake-up call. Retirement should be a time of freedom, fulfillment and peace of mind, not stress and uncertainty. As a registered financial planner, licensed financial advisor and certified investment solicitor, I've seen how proper planning can transform lives. The key to a comfortable retirement lies in one crucial shift: transitioning from labor income to capital income. Labor income requires you to work for your money, while capital income allows your money to work for you.

As the saying goes, "Retirement can be the longest holiday of your life or the longest nightmare." The difference between the two lies in the steps you take today. Let me guide you through five practical steps to ensure your retirement is everything you've dreamed of.

1. Start planning early

The moment you receive your first paycheck is the ideal time to begin planning for retirement. If you haven't started yet, the next best time is now. The earlier you begin consistently setting aside funds, the more your money can grow over time. Time and the power of compound inter-est are your greatest allies in building wealth. Even small contributions, when invested wisely, can grow exponentially over the years.

2. Allocate a budget for retirement

Your retirement savings should be a nonnegotiable part of your budget. If you're in your 20s, aim to set aside at least 5 to 10 percent of your income. The older you are when you start, the higher the percentage you'll need to save, as the time horizon to retirement shortens. Prioritize your retirement fund just as you would any other essential expense.

3. Identify your retirement age

and life expectancy

Determine the age at which you wish to retire and subtract it from your current age. This calculation will give you the number of years you have to build your retirement fund. Additionally, consider your life expectancy. With advancements in health care, people are living longer, which means your retirement savings must sustain you for potentially decades.

4. Estimate your retirement income needs

Calculate how much income you'll need to live comfortably during retirement. When making this estimate, factor in inflation, which averages 3 to 5 percent annually in the Philippines. Additionally, account for rising health care expenses, which are projected to increase by 18.3 percent in 2025, according to a recent study by WTW. This steep rise highlights the importance of having a comprehensive medical plan and a dedicated health care fund to cover future medical needs, including maintenance medicines, frequent doctor visits and hospital stays.

5. Invest wisely

to grow your retirement fund

To transition from labor income to capital income, you must make your money work for you through strategic investments. Diversification is key — balance low-risk investments like money market funds with higher-risk assets like equities. Combine liquid assets, such as savings, with less liquid ones, like real estate. Always consider your risk tolerance and conduct thorough research before investing. Seek advice from trusted and knowledgeable professionals, and only invest in instruments you understand. Automating your contributions, such as linking your payroll ac-count to your retirement fund, can help ensure consistency and discipline.

The path to a comfortable retirement

By following these five steps, you can steadily convert your labor income into capital income, ensuring a steady stream of passive income during retirement. Whether your dream retirement involves traveling the world, living peacefully in the countryside or pursuing passion projects with-out financial worry, it all depends on the actions you take today.

As Mahatma Gandhi wisely said, "The future depends on what you do today." Let's take control of our financial futures and start planning for a secure and fulfilling retirement right away, without delay. By doing so, we can transform what could be the longest nightmare into the longest holiday of our lives.

Jen Lim-De Leon is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 110th RFP program this March 2025. Please email info@rfp.ph to get more details.