Calculating Your Retirement: Smart Money Moves for Gen Z
Although retirement still seems like a distant concept for Gen Z, starting early can increase your success of preparing sufficiently for retirement. As with every goal, it’s a must to have the right strategies to achieve financial security.
We’re here to help you in planning for retirement. First, we’ll help you figure out the answer to your question: How much money do I need to retire as a Gen Z?
How to Calculate Retirement for Gen Z
Calculating your retirement needs involves a few steps. Here’s a simplified approach to jumpstart your retirement planning process:
1. Decide on your Retirement Age
When do you want to retire? The age at which you intend to retire will influence how much money you need to prepare and how long you still have to prepare for retirement.
The average retirement age in the Philippines is between 60 and 65, which is the compulsory retirement age. If you choose to retire at this age, you’ll have longer time to prepare your finances or set up a retirement insurance plan than if you retire early at around 55.
Retiring at different ages also impacts their potential lifestyle and cost of living. Younger retirees may have more energy to travel while others may have higher healthcare costs.
2. Estimate your Retirement Years
Estimate how many years you will need retirement income. If you plan to retire at 65 and expect to live until 95, you will need 30 years of income to live comfortably.
With advancements in healthcare and increasing interest in fitness, people are living longer. It’s wise to plan for a longer retirement period, potentially up to 30 years or more.
3. Estimate your Annual Retirement Expenses
Another crucial step is estimating how much you need for retirement. But how is retirement savings calculated for Gen Z in the Philippines?
The factors we discussed earlier can help. Consider your desired lifestyle and potential living expenses, such as housing, food, healthcare, for the duration of your life expectancy.
Consider also if you’re potentially taking care of others, like your parents or kids. Many Filipinos are part of the sandwich generation, which can make retirement more expensive.
Calculate your potential living expenses so you know how much you need and, of course, what strategies to implement. This could involve implementing unsandwich solutions to help you build financial stability.
4. Adjust for Inflation
We can never be too sure about how the world and Philippine economy would look like by the time Gen Zs retire. A smart financial strategy always makes room for inflation, and you should apply this to your retirement preparations, too.
For example, if you estimate that you need PHP 400,000 yearly in today’s peso, you should calculate its future value by the forecasted inflation rate of 4% by 2050. So, if you plan to retire around this time, your expenses will likely be around PHP 1,066,320.
5. Calculate the needed Total Retirement Savings
Multiply your adjusted annual expenses by the number of years you expect to be in retirement. This will give you a rough estimate of the total amount you need to save.
Following the example earlier, if your annual expenses by retirement come up to PHP 1,066,320 and your retirement period is estimated at 30 years, you’ll need PHP 31,989,600.
6. Identify Sources of Income
The good news is that your retirement fund doesn’t all need to come from your savings. You can pad your savings with other sources of income, such as an insurance plan like Abundance. This is why it’s vital to plan for retirement.
A financial advisor can help with calculating retirement savings for Gen Z and, subsequently, plan for retirement to ensure that you’re prepared for the future. With an understanding of your retirement plans, your financial advisor can recommend the appropriate insurance plans, as well as investments, to grow your portfolio.
Prepare for Retirement
Gen Zs are still at the prime of their life, which is also the perfect time to prepare for retirement. Learning how to calculate retirement for Gen Zs is the first step to retirement planning, allowing them to set themselves up for a secure financial future.
Start early, stay informed, and make consistent efforts towards your retirement goals with premium insurance in the Philippines from InLife.
