Most Filipinos only start planning for their retirement when they hit the golden age of 50. They feel that it is the most ideal period as that is when most major financial obligations would’ve been fulfilled or nearing fulfilment, such as paying off home mortgages, car loans, and college tuition.
However, most financial planning experts will actually tell you that the best time to prepare for your retirement is in your 20s, or as soon as you start earning income.
The best way to illustrate this point is by comparing two investors – one who started at 25 years old (Anne), and another who started at age 40 (Bryan). In our scenario, both will save the same amount (P1,000 a month), for the same number of years (15 years, or until when Anne is 40, and Bryan is 55), and with the same interest rate (6% p.a.).
However, despite the similarities, by the time they each reach 65 years old, Anne would’ve earned nearly a million pesos more (P1.3 million vs P550,000) than Bryan. Why? Because Anne would’ve had a longer investment period (40 years, from age 25 to 65) than Bryan (just 25 years, from age 40 to 65). This is the magic of compounded interest, coupled with the exponential factor of time.
Therefore, it pays (literally!) to start saving and investing for your retirement as early as possible!
With early retirement planning in mind, here are a few things you should accomplish before reaching 50: