PREPARING FOR THE FUTURE

There is a saying that “life is what happens to us while we are making other plans.” The middle and later years of one’s life can be the most enjoyable and productive years of a person makes plans for what the rest of his life will be. The best time to do this is during the middle years when children have been reared, family responsibilities are diminishing and the search for self may be intensifying.

Retirement Planning

Retirement planning is a very individual and personal effort, which can be accomplished by an individual and his loved ones. An individual’s retirement requires personal involvement by him and his loved ones. To be effective, a retirement plan must motivate the person to act on those plans.

A very important point in retirement planning is that one is planning to retire to meaningful activities rather than from work. Filipinos become emotionally involved and attached to their work so much so that retirement becomes for them a very dreadful and threatening experience. Retirement is usually viewed as something negative. To many Filipinos retirement means loss of money, loss of friends, loss of activities. Yet, in truth and in fact if one’s retirement is properly planned, it may mean 50 more hours of free time, a week for 20 or 30 years of one’s life; thus, more time to gain friends and accomplish more in life. To retire is to gain, to grow, to change for the better.

A very important factor in a planning session is one’s vision of himself as he grows older. This self impression will color the older person’s view of what he will become one day. It is a must to define one’s mental image of himself.

Retirement is Change

Retirement is a transition. Thus, to retire is to change. Our attitude toward life is influenced by our attitude toward change. The only permanent thing in life is change. Thus, look on change as a challenge and an opportunity: a challenge to make the rest of your life rewarding, and an opportunity to explore the options that will make this possible.

Properly planned retirement is the beginning of a new lengthy, important stage of life, rich with promises and surprises. We can expect excellence in our changed status. Many of those who have planned their retirement don’t stay “retired” for long – they surge back into activity, showing enthusiasm and energy that would be impressive at any age.

In looking toward retirement, remember the changes you have already adjusted to and how in that process wisdom was gained that enabled you to put life in better perspective. Now it is possible to weigh, analyze, and act on matters with greater self-confidence than in earlier years. Persons who make a successful transition to retirement all appear to retain some aspects of their previous more structured lives – daily or weekly schedules, measurable goals, meaningful personal contracts, and a sense of challenge.

Retirement is a social transition. After retirement the roles we played in our lives may vary with family, leisure, and volunteer activities. Retirement may alter dramatically the rhythm of daily life. Less structured, leisure-oriented living may replace the routine of work-oriented living. The most important thing to do is to rethink your traditional work role. In retirement, you should have the time, freedom, and flexibility to vary your former roles according to your interests, tastes, resources, and state of health.

Retirement is the beginning of a new kind of recognition, participation, or satisfaction. Filipinos are afraid to retire because of some false notions about retirement. They consider it as loss of satisfaction in a job well done, or loss of prestige and a sense of self-worth or loss of influences. Retirement that is properly done is a transition from a trade or profession that paid money to a period of life that can pay even richer, though less tangible, rewards. To make retirement the positive experience it ought to be, we should begin now to clarify our values and priorities in life so we do not always measure ourselves by what we produce or by how much we earn.

Steps in Retirement Planning A person finds that his attitude becomes more positive as he start to make plans and to adjust to changing roles. Thus if you approach retirement in a planned way, you may not find adjustment difficult. The following are the steps in retirement planning:

Step One: Know yourself and when you need to explore.

Have the capacities for curiosity, creativity, surprise and change. Maintain a sense of wonder anticipation about the future.

Step Two: Look at your options for the future.

There are so many venues for our abilities even after retirement. Ability knows no age limit. Maintain an open, positive realistic outlook in life.

Step Three: Clarify and organize your needs, wants, and long-range objectives.

Know what you want to achieve in this new phase of your life. Prioritize them according to your goal values.

Step Four: Develop a positive attitude toward retirement which you can share with family and friends.

Be optimistic. Look at the future with a positive mind.

Step Five: Become aware of professional, educational, recreational, social and other resources available.

In many areas, service agencies can provide a surprising number of things: medical services, business advice, housing assistance, financial counseling, consumer guidance and tax advice. Learn which volunteer activities are available in your area. Talk to relatives and friends who have made successful transitions into retirement. Contact your library and government agencies such as the Social Security System, GSIS, Medicare to familiarize yourself with their resources.

Step Six: Identify and commit yourself to specific steps you need to take to reach those objectives.

There should be a commitment on your part to make the most of your retirement. Your retirement is what you make it.

Step Seven: Develop a budget for now and for your retirement years so that you will have the financial resources to carry out your retirement plans.

Understand the support systems needed for retirement, especially pensions and benefits.

Step Eight: Review and revise your objectives and budget in an orderly way at set periods.

See to it that your objectives and budget are realistic.

Step Nine: Keep focused on your plans and objectives.

Don’t get lost. Work your plans.

Step Ten: Act on your plans and objectives and maintain momentum.

Perseverance is the key to successful retirement.

STEPS TO HAPPIER RETIREMENT>

In retirement there will be changes, challenges and opportunities that you’ve never been confronted before. By being prepared, by maintaining our support systems and knowing how to take advantage of opportunities, many of our problems can be minimized or even eliminated. In this way the nearer we get to retirement, the more happy about it we’re likely to become. The following steps are the steps to a happier retirement:

Step One: Accept the truth that you are nearing retirement.

Face reality. Accept those things you can’t change, change those things you can and use your wisdom and experience to know the difference. If you feel depreseed about retirement, take positive action and lift your spirits. Talk out with a friend who has a healthy outlook in life. Retirement is but one more challenge that lies ahead.

Step Two: Establish new relationships and strengthen family ties.

Establish warm relationship with family members. Couples who are about to retire must be mutually supportive. They must talk to one another about their retirement goals and ideas for retirement activities. They must make each other a vital part of the other’s retirement planning by discussing everything from finances to leisure. Each spouse should reassure the other that his or her love and devotion will not change with retirement.

Friendships are very important in retirement. Retiring couples should help each other rediscover old friends or find new ones. They should seek new social contacts. They should develop new routines. They should keep up their appearance. They should find the right balance between separate and joint activities but each other’s privacy should be always respected.

Retiring couples should be alert to four key danger spots in retirement marriages such as the following:

(1) Financial Problems. – “Ang kabiyak ng puso ay kabiyak ng pitaka.” Plan now to adjust your expenses to fit your income when you retire. Decide how the money will be spent. See to it that your investments are the best ones for your retirement years. Have discussion on all your financial assets and their disposition. Review any trust arrangements. Last but not least, make or update your wills.
(2) Boredom. – Couples should explore shared activities and encourage each other to seek individual pursuits to overcome boredom. Boredom causes the loss of the will to learn, to grow and to live. It leads to depression and other health-related problems.
(3) Lack of Communication. – Be sure to talk and speak with one another. Be sure to listen to each other. The words a couple share in retirement may be the most important words they’ve ever spoken.
(4) Adjusting to New Roles. – Couples should help one another adjust to changing roles demanded by retirement.
Single retirees may be quite different from that of couple retirees. Some of them have evolved fulfilling lifestyles since they are not tied down by family responsibilities.

The greatest drawback of singlehood, however, is loneliness. But since they have most likely learned how to deal with being alone and have probably established a network of close friends, this is not so much a problem.

It is the divorced, widowed and separated people who may encounter difficulties in retirement. More often than not, they are deprived of income unless they have established wealth and careers of their own. Thus divorced, widowed and separated people may have to take the initiative in making new friends, finding activities making both ends meet and establishing new friends.

Potential widowhood is something that can happen to a retiree. The death of one’s spouse is one of the most stressful upheavals of life, bringing with it a series of emotional responses natural to the grieving process. Fear, anxiety and confusion are the usual reactions. Shortly after the death of the spouse, a flurry of support from family members is given to the widowed person but this support is not very enduring. The Filipino value of ningas cogon comes out. Within a short period, widowed persons usually find themselves on their own.

To overcome loneliness, the widowed person must keep himself busy and dedicate himself to his children, if he has one. Another thing he can do is to interact with other widowed persons: As a preparation for this inevitable event, husbands and wives should discuss candidly the possibility of each other’s death and, as far as possible, prepare for it. They should talk about the logistics, both financial and emotional that will be needed to adjust to life alone. To be practical, each should make a will and list all valuables, securities and important documents and their location. They should specify money that should be available upon the death of one of them, such as insurance benefits and if joint bank accounts and safe-deposit boxes should be immediately accessible to a surviving spouse.

Step Three: Develop other interests.

Develop outside interest and participate in activities with other people of similar interests. To get love and attention you need to give them. If you want to meet people, meet them more than halfway. Cultivate hobbies and crafts. Get involved in rewarding community service projects. Join a service organization, church or civic society in which you can help others as well as yourself. There’s nothing more stimulating than a “cause” and you’ll make friends with people who share your goals and interests. So investigate clubs and organizations in your community. Choose not only for its purpose but also for its social opportunities.

Consider the possibility of a late or second marriage. Companionship, lasting affection, and mutual security are valid reasons for a late or second marriage. But before you marry or remarry later in life, discuss with your prospective mate your and his/her expectations about sex to avoid possible embarrassment and disappointment after marriage. You should also seek sound legal and financial advice about you and your prospective spouse’s assets. Take time to get to know each other. If your prospective spouse is agreeable, have your lawyer draw up a “prenuptial agreement” that can avoid later questions about ownership of assets.

Make new friends, especially with the young. Youth and age share many qualities and have much to offer one another. Retirement provide increased opportunities for interaction with the young – they may be your own children or grandchildren, relatives of friends or neighbors or the young people you meet through your activities. Friendship with the young makes the retirees discover fresh ideas and new interests.

Step Four: Seek new adventures.

Retirees keep the vigor of life by discovering new experiences, new ways of doing things, new responsibilities, new sights, sounds and scents. A growing number of Filipino retirees are assuming partial or full responsibility for their grandchildren especially during the infancy stage. They act as “yaya” and this enliven their lives, as if they have a new baby again.

Other retirees are assuming partial or full responsibility for aging dependent parents. They enjoy accompanying them for a check-up with the doctor, going to church on Sundays and visiting other relatives.

It is up to the retiree to decide which new adventure he will be enjoying to do. What is important is when you wake up, you can look forward to something.

Step Five: Take good care of your physical condition.

Guard your health by a having a regular check-up. As long as you are regularly checked-up by a competent doctor, don’t give much attention to aches and pains. See to it that you have regular exercise and eat a proper nutritious diet.

Step Six: Think and make yourself look the best you can.

Each day, decide on some place to go, something to do, or someone to visit or telephone. Take pride in yourself. See to it that you dress neatly and walk confidently. You alone can make yourself and your life seem worthwhile. Face the future with confidence.

Step Seven: Develop a sense of humor.

Learn to see the incongruencies in life. Laugh at these incongruencies and relax. Enjoy life as it is.

HOW TO PREPARE YOURSELF FINANCIALLY FOR RETIREMENT

Where will the money come from to bridge the gap between your guaranteed retirement income and your estimated expenses in retirement? How will you put that money to work? How will you determine your future financial needs? What are the things you need to consider before investing? What are the types of investing? Types of speculating? How will taxes influence investments?

For some Filipinos, retirement does not bring in financial problems because they expect their children to take care of them when they grow old. For others, their personal savings and estate are more than enough to provide their needed income for retirement. But how sure are we that our children will have enough financial resources to take care of us when we grow old? Do you want to be an additional burden to them in their life? How sure are we that our personal savings and estate may not prove to be inadequate in inflationary times? How sure are we that our social security and pensions will provide sufficient income for us after ten years? The best thing to do, whether you have children or not, personal estate and savings or not, social security and pension or not, is to have a financial plan and strategy for retirement.

The following are the steps to prepare yourself financially for retirement:

A. Determine Your Future Financial Assets

There are two kinds of retirees: (1) Primary retirees; and (2) Secondary retirees. Primary retirees are those between the ages of 55 and 75; secondary retirees are persons over 75. Primary retirees generally are able to maintain an independent lifestyle while secondary retirees are often faced with physical or mental conditions that limit their independence.

To determine your future financial needs, you must determine your desired lifestyle when you retire. Some elderly Filipinos want to maintain their independence even after retirement: they don’t want to be “umaasa sa mga anak” nor be a burden to their families. They want to live independently from them. Retirement planning is the perfect opportunity to view your own lifestyles objectively, your individual needs and preferences regarding other people, the community, use of time, space, money, housing choice, etc. Do you want privacy or closeness to relatives? Do you want rural or urban life? How important are educational, medical, social, cultural, recreational and employment opportunities to you upon retirement? How do you want to spend your time? What is important to you? How active are you in your community? How important are your current friends in everyday life and in times of crisis? How will your lifestyle change if your spouse die? How important is formal and/or informal entertaining to you? How important are having friends and family over? Will you need space for houseguests, pets, elaborate hobbies, or a home office? Will you want to go back to school or keep working after you retire?

Look at your true needs, wants, likes and dislikes. Dream about your best possible future.

B. Suit your Retirement Home and Lifestyle to your Needs and Preference.

Your retirement home and lifestyle must suit your needs and preferences and be affordable now and well into your retirement. Ask yourself the following questions: How will your present home suit in early retirement, and in the later years of retirement? Will you be able to finance the upkeep of the house, cost of taxes and insurance? Does it meet anticipated increasing need for energy, efficiency, safety and convenient physical layout? Will inflation plus reduced income after retirement make your current home unaffordable at some future points? Do the neighborhood and community meet your current and future needs? Is it near your friends, family members, children, grandchildren? Does the community offer services for older persons? Are there recreational and cultural facilities available? Are there special health services, clinics, hospitals? Are there churches, schools, universities nearby? Are there business establishments, factories nearby?

C. Study your various Options and Analyze your Needs and Wants in terms of priority and affordability.

You have various options to select from. They are the following:

1. Staying in the same house. Some homeowners are house-rich but cash-poor. Their home is their greatest asset yet they can’t afford taxes and repair due to fixed income and inflation. A solution to this is to use the equity in your home. Equity, by the way, is the cash value of your property minus any claims against it. If your house is appraised at P 350,000 and the balance due on your mortgage is P 50,000, your equity is P 300,000. Think of a way to use that nest egg.

There are several methods of home equity conversion. They are the following:

a) Reverse Mortgage is the opposite of a conventional mortgage loan. The loan is paid to the homeowner in monthly payments, with the amount determined by the amount of home equity borrowed against the interest rate, and buildings, etc. that physically depreciate or become depleted.

b) Sale/Leaseback or life tenancy

c) Deferred Payment loan, and

d) A Homeowner Equity Account

Another way to ease your financial concerns if you decide to stay put is by renting out rooms in order to earn income and have companionship. You may also convert part of your home into an “accessory apartment” (an independent living rent added on to or carved out of a single-family house or participate in “shared housing” (sharing your entire home with other unrelated persons.) You may rent out your house and move into more suitable quarters, which you can buy or rent.

2. Changing housing. You may change domicile from house to apartment. Other options are boarding houses which provide food and shelter in a homelike setting; enriched housing, a public or non-profit program that sets aside some units in a multi-unit building for persons 65 or older who need some assistance with day-to-day living; congregate housing, where housekeeping, food and recreation are provided for older people who do not need intensive medical care; Share-a-home buildings bought by charitable organization that becomes a shared residence for 3 or more elderly people; day care centers which bring elderly clients to their assisted living facilities and return them to their homes in the evening.

3. Relocating. Size up a new community before committing yourself to living in it. Some retirees head for foreign lands: USA, Canada, Spain or Great Britain. Most retirees find it helpful to be able to speak the language of their adopted country. Be warned that it won’t be exactly “like home.” There may be some adjustment and culture shock problems.

D. Put your Money to work by having an Investment Program

An investment program to supplement your basic retirement income could make the difference between living in comfort and “getting by”. Consider investment possibilities that could add to your financial security. The investment area is growing and changing rapidly as tax laws and economic conditions change. To be a successful investor, constantly update your knowledge. Investment’s broad spectrum of possibilities range from very safe to very risky. Know the difference between investing and speculating.

1. Investing is putting your money to work in ways that make it possible for you to know, with some assurance, how many pesos you’ll have 5, 10 or 20 years from now. 2. Speculating is putting your money to work in ways that cannot provide assurance as to how many pesos you’ll have in years to come; you could end up doubling or tripling your contribution, losing it all, or somewhere in between.

No investment is entirely risk-free. Since older persons do not have many years to recover if they speculate and lose, prudence dictates that you should not speculate until you have first established a well-disciplined investment program. There are two basic ways of putting your money to work.

a) Lending (Debts) –

b) Buying (Equity) –

Before making an investment decision, the following questions should be asked by you:

1. What are the income tax considerations in the investment? Tax laws allow a deduction on the owner’s tax return for this depreciation of homes and the deductions can be used to offset any income that the individual receives, in effect “sheltering” an income earned from a reverse mortgage from taxes. Ask the assistance of a certified public accountant, or tax attorney to determine the best overall plan for you, considering the tax implication of your investment program.

2. What yield or return can you reasonably expect on your investment, and what assurance is there that the currently promised yield will continue for the foreseeable future? How will your yield be affected by the commissions, service charges and other fees?

3. How safe is your principal? What fluctuations in value might take place? What can cause those fluctuations? Are they in your control?

4. How quickly can you cash in your investment, should the need arises? Would you suffer a loss or penalty if you do so?

5. To what extent, if any, are your yield and principal guaranteed? There’s a big difference between PDIC’s insurance on a savings plan and the hearty handshake of an eager sales person. What does the guarantee state? Who is making it? Where will you stand if they fail to honor the guarantee?

6. If the investment plan runs for a stated length of time, is that term in line with your future needs? Don’t tie your money up for longer than you can afford to.

7. To what extent will the value of your investment keep up with inflationary trends?

There are several investment options. They are the following:

1. Treasury and Agency Securities – These are considered to be in the safest category of investments. There is a wide choice of maturities to match your specific needs.

a) Treasury Bills – Short-term debts of Treasury; most common are 13-week and 26-week issues.

b) Treasury Notes – Medium-term Treasury debts which run from 2 to 10 years to maturity.

c) Treasury Bonds – Long-term Treasury debts that run as long as 20 to 30 years.

2. Corporate Securities – Major companies issue corporate bonds – long-term debts, which may run as long as 30 to 40 years. A corporate bond consists of a promise to pay interest at a stalled rate (called the “coupon” rate), plus a promise to repay the full amount of principal on a set future date.

3. Stock Market – Buying shares of stock means you’re buying a tiny piece of ownership in a company. If the company prospers, it may pay dividends and/or the value of your investment may increase. If the investment community at large considers your company “desirable”, the demand for shares may boost the value of the stock, and you can profit on a later resale. On the other hand, profitability doesn’t necessarily mean dividends; and a promising future doesn’t necessarily mean future capital gains.

Before buying in the equity market, you should determine how much money you can risk losing. If you can’t afford the losses, you should not speculate.

Stocks are subject to the myriad force that cause prices to go up and down. However, the range of fluctuation tends to be less with certain classes of stocks than with others. Preferred Stocks have the “preference” in the splitting of profits than the common stocks; they have more assured and more generous dividend returns. There are also the growth stocks, that is, the more volatile, more speculative, more “glamorous” common stock, which have greater chance of capital appreciation, but at the same time, has also a greater chance of capital loss. The income stocks are more staid and more conservative, more solid which offer a more assured flow of individual income to the conservative investor, with a relatively lower risk of price fluctuation.

Before you play the stock market with real money, play it on paper for 6 to 12 months. Pick an imaginary portfolio and track your choices. Notice the forces that make prices go up and down. Read books, magazines, brokerage house brochures, newspapers. Interview brokers to find that rare one whose insights, experience and personality seem right to you. Then before taking a real plunge into the market, set, and stick to, prices at which you’ll sell: “I will sell if the stock drops to X pesos per share, or if it rise to Y pesos per share.”

4. Real Estate - Handled properly, a real estate involvement can be fruitful. Knowing how to wisely buy, finance, manage, and sell real estate takes years of experience.

5. Commodities, Metals, Gems and Collectibles – These are purely speculation. In the commodities market one is placing a bet on the future values of such things as beans, rice, foreign currencies, interest rates, and an assortment of other items whose price can fluctuate widely. This is unadvisable unless you have a charisma for forecasting floods, droughts, wars and strikes. A “managed commodity account” for those who have a substantial net worth can improve their chances of becoming a successful commodity trader.

HOW TO MANAGE YOUR TIME DURING RETIREMENT

The fear of losing your dynamism and vigor when you retire can be overcome by planning the meaningful use of time before retirement. There are several formulas for retirees to remain active, useful and happy in retirement. Some of them are the following:

1. Learning – Education never ends. There are always new things to learn. Continue learning – regardless of your age. You may choose practical skills such as electricity or auto mechanics, academic pursuits such as French, Spanish or English, or enjoyable subjects such as jewelry appraisal, speech or cosmetology.

Returning back to school means not only earning a diploma or preparing for an entrepreneurial endeavor, but also making social contacts, stimulating your intellect and honing skills to use in retirement. If it will be physically difficult for you to go to school, you may opt for enrolment in correspondence schools or distant televised education.

2. Participation in some activities with other people. Joining clubs, volunteer groups, religious and civic associations give you a sense of having established relationship with others, recognition and a sense of adventure.

Participating in a neighborhood club will keep you healthy, alert and active. Volunteer service in hospitals, churches, schools will give you status and social contact. Right now decide what you want to do and what you can do. Every ability or gift has a volunteer application if its master is willing. A born salesperson van volunteer to raise funds for the hungry people of Africa. A patient educator can volunteer to educate the children in the slum areas. You can join religious/church organizations such as Knights of Columbus, Holy Name Society, Legion of Mary, Adoracion Nocturna, etc. or simply you can offer your services as Mass Commentator, if you have good oral communication.

Other national and local groups where you can have volunteer opportunities are Red Cross, Boy Scouts, Girl Scouts, etc.

3. Specialize in a discipline or field which is your forte. It is human nature to desire some sort of recognition and leave one’s name in history. One way to do this is to select a discipline or project and become an acknowledge expert in such area. You can do this by reading a lot and doing research, investigation and dialogue with other specialists in such field.

4. Travel for Adventure and Education. Many Filipinos have reached their fifties without seeing the entire Philippines or other parts of Asia, although perhaps, they had traveled in far away places such as Canada, U.S. and Europe.

Meaningful travel includes not only sightseeing but also interacting with other people in other places. Travel within the Philippines is most affordable to every Filipino. Meaningful travel must have a goal such as to know and learn about the customs, values and practices of other regions and countries. Pick places to go and things to do that you will enjoy as a person. Develop an interest in other fellow Filipinos and other nationalities.

5. Have a healthy entertainment and leisure. A person’s concept of leisure is influenced by his cultural background and present environment, physical and mental limitations, financial considerations, and location of recreation.

True leisure is enjoying what we do whether we are doing it for ourselves or for others. The rewards of free-time come not from having it, but from using it with purpose and meaning. Leisure or free-time activities are those we want to do rather than have to do. Spending time require careful planning. Retirement gives a retiree a leisure bonus of about 50 hours a week – 2,000 extra hours of freetime each year. In planning your leisure time, consider quality as well as quantity. A person may enjoy more fully a minute of poem writing than a month of travel. Consider variety too, that is, more than one activity to suit your needs and wants.

Entertainment is time for relaxation to take special joy and delight in life. Plan what activities you can do to derive pleasure. One activity is watching television, another is radio. Reading makes you exercise your imagination. A search for what you find fascinating and worthwhile is collecting – a personal treasure hunt. Collections may include antique furniture, rare books, buttons, bottles, cars, clocks, coins, dolls, old prints or stamps.

6. Develop your Creativity. Well-used free time can bring out your creativity – the creation of your thoughts or feelings through words, deeds, or artistic involvement. Creativity is rising to new levels of accomplishment in old pursuits or in new endeavors. It is the joy of living; thus judge your accomplishment by how it makes you feel. Compare your work of today with your work of yesterday.

Forms of creativity are crafts, gardening, writing, drawing, painting, sculpting, theater, music and cooking. You may develop your creativity by craft hobbies such as ceramic work, photography, upholstering, toymaking, etc. You may develop your creativity by gardening which is nurturing beauty or growing plants for sale. You may develop your creativity by writing. Theaters have needs for older persons. Cooking promote development of imagination.

7. Maintain your Physical Fitness. The cardinal rule of fitness past 50 is movement – ideally; movement that builds your heart and lung capacity, maintains your body flexibility, and increases your muscular strength. Avoid the sedentary life at all costs; don’t just sit. Walk, run, swim! Do your physical activity to stimulate your mind as well as the body.

Stress management is an important factor of physical fitness. Stress is linked to high blood pressure, kidney disease, ulcers and other digestive problems, and the wearing down of the body’s immune system. It is also a strong risk factor in the development of heart disease and cancer.

8. Devote time for Contemplation. Devote time to get back to the deeper issues of life. Many people return to or find religion as they get older. Some devote their remaining life to “Cursillo de Christianidad” or Charismatic movements. Devote time to remind you to cherish this relationship and the people central to your lives.

9. Look for paid work in retirement. For some Filipino retirees, paid work is an economic necessity. They must work to fill the gap between what pension provides and what they need to make both ends meet. A very recommendable paid work is establishing a small business, in your home by teaching, editing, catering, repairing, etc. Paying hobbies can also help you earn money.

LEGAL RIGHTS AND OBLIGATIONS OF A RETIREE

What are the rights and obligations that will be important to you when you retire? Why is it important to plan your estate and write your will in retirement? What can the law do and cannot do for you and to you when you make a major purchase, receive a lump sum pension payment, set up a trust or other form of estate planning, hold property in joint ownership, buy, franchise, set-up, or sell any interest in a business or partnership, or buy, sell or rent housing? What are the legal implications of marrying late in life or for a second time, or terminating an existing marriage? How will you handle the affairs of an ill or incompetent relative or friend?

The legal rights and obligations of a retiree in these matters are more complicated and delicate. To protect them to the fullest, there is a need for the retiree to have a lawyer. A good lawyer is not only a guide but also a negotiator, persuader and adviser. To choose a good lawyer, ask satisfied clients and other professionals, contact local bar or referral services and check a directory. In many situations you may need a lawyer who specializes in a particular field.

The criteria of lawyers for their fees are the time devoted to the job, difficulty of the job, ability to pay, or a combination of these factors. Some lawyers charge on a percentage basis of the amount at stake such as in personal injury matters or real estate transactions. Other lawyers charge by the hour, including both research and consultation time. Court costs, filing fees and other out-of-pocket expenses are usually added to the hourly or percentage fees a lawyer charges.

In dealing with lawyers you should be very alert and methodical. The steps are the following:

1. Determine what the fees will be and what manner of payment will be expected of you.
2. Demonstrate confidence in the attorney.
3. Freely discuss all necessary information.

If you can’t financially afford a lawyer, contact local legal aid organizations such as the MABINI. Some law schools also offer free legal assistance, so check them. Contact government agencies in areas such as banking, commerce and trade. Get help or assistance from the Legal Department of your office where you are employed or had been employed. They will be too willing to help you.

The following are the areas of endeavors wherein you will need the help of a lawyer.

Estate Planning

Estate Planning is the preparation for the orderly disposition of one’s assets according to one’s wishes. The keystone of an estate plan is your will.

There are many advantages in putting your financial and other assets in order, no matter how small it is. It enables you to make arrangements that will minimize government taxes on your estate and to arrange your affairs to minimize the probate and administrative costs connected with it. Other advantages are proper distribution of your estate so your spouse, children and other heirs may be provided for as you wish, settlement of estate with a minimum of unexpected expenses, peace of mind about the welfare of your family after your death and knowledge of how your assets can be converted to cash.

It is advisable to use a team approach in estate planning, that is, there should be a lawyer, an accountant, a banker, and an insurance agent. The lawyer can advise you to determine which of several devices – wills, trusts, gifts, etc. – would be best for passing along wealth to your survivors; prepare the relevant documents and see that they are properly signed and witnessed. The accountant will help you to minimize estate tax liabilities for you. The banker can advice you in considering your overall plan and in trust arrangements. The insurance agent advises you on insurance. A fifth professional who can help give professional advises on all aspects of your estate (taxes, investments, insurance, trusts, etc.) is the financial planner. He can give you recommendations on how best to preserve and enhance your estate if you give him a complete picture of it. Exercise caution in choosing a financial planner for it is necessary to divulge full details about your wills, insurance policies, mortgages, stock certificates, bonds and mutual funds. The advantage of using a financial planner is that you deal with one person, who, in turn, would consult with other professionals as needed. A financial planner may charge a wholesome amount for a financial master plan. Others charge per hour when providing advice on specific topics. Some planners earn their living from commissions on the financial products such as stocks, bonds, mutual funds and insurance, they sell clients in connection with their planning. Accountants generally charge on a per hour basis. In some cases, they may charge a set fee. Insurance agents don’t change for their counsel.

In choosing the professionals for your estate planning team be sure to seek recommendations from others who have used their services and always determine the fee structure beforehand.

Strategies and techniques for Estate Planning

There are several ways, techniques and strategies to reduce the taxable portion of a retiree’s gross estate. One way is the marital deduction which consists of gifts and bequests to the surviving spouse. There are limits on the maximum allowable marital deduction. In some countries like the U.S. a substantial portion, if not all, of the remaining taxable estate can avoid taxes as a result of the “credit against taxes” on gifts and estates. This is what is called unified tax credit, that is, the credit exactly offsets the amount of the tax, so no taxes will be payable on the estate.

Another way of minimizing potential estate taxes accordingly and reducing the size of one’s estate is making tax-exempt gifts. There is the annual tax-exempt limit in making gifts. Gifts in excess of the tax-exempt allowances is subject to tax.

It is recommendable to review with professional advisers just how much insurance will be needed to cover the expenses of one’s estate and the best type of policy to get. One who has a good retirement income need not carry a lot of life insurance. Include the life insurance policies owned by you in your taxes for income tax purposes. Other types of insurance – liability, homeowner, auto serve to protect the various assets of your estate. Look for the best way to set up insurance policies to minimize or eliminate taxes and delays.

It is advisable to discuss which is the best form of property ownership and your wishes as to who should receive the property with an attorney to determine what’s right for your needs, and then to take whatever steps seem wise with regard to your overall estate plan. The different types of ownership are community property ( each spouse owns half the property acquired during marriage); tenancy in common ( two or more persons own shares in the property); tenancy by the entirety ( joint ownership is limited to husband and wife); joint tenancy with right of survivorship ( two or more persons hold property jointly).

One of the most important tools in building an estate plan is trust, a plan by which a trustee ( usually a bank ) holds your assets for your benefit or that of your beneficiaries. For example, if you wish to transfer P 500,000 to a son but are concerned that he might not finish his college studies, you can establish a trust wherein the bank as trustee will hold the money for your son in accordance with with your written instructions. If you want the income from the fund to be paid to your son annually, the bank will see to it. If you want the money paid out in installments or in a lump sum on his college graduation time, the bank will see to that, too. It is wise to have your lawyer prepare this. The bank receives a fee for this service.

There are different kinds of trust. A living trust is one that is set up and takes effect while all parties are living. A testamentary trust, which is created by will, takes effect upon death. For example, you can make arrangement in a trust so that your life insurance proceeds could flow into a trust fund upon your death and subsequently managed by the trustee, who may not be a beneficiary.

A revocable trust can be revoked or cancelled by the person who established it. An irrevocable trust cannot be terminated.

For the right people in the right circumstances with an estate large enough to justify the payment of trust management fees, trusts can be an ideal way to pass wealth from one generation to another.

The Importance of a Will

Filipinos are not fond of making their will while still strong and vigorous. It is even considered a discourtesy for a son to request his parents to make their will and ask them what he is going to inherit from them. For many Filipinos the time ti make a will is when you are about to die. What if you die in an accident and you do not have a will? There will be chaos even among your children regarding inheritances.

A will directs how you want to distribute your assets. Make a will. Show that you care about your survivors and that you could also save them money. Name an executor to carry out the responsibilities of estate settlement.

If you are married, both you and your spouse need to draw up valid wills, because both of you own property; your car, home, possessions. Ask a lawyer to prepare a will for you. It is well worth the investment. Have your lawyer keep the original. Keep copies in your safe deposit box on vault; keep a copy with a relative. Review your will from time to time to make sure that a revision of tax laws, change in your status or the status of your assets or heirs won’t affect the terms of your will. You may need to modify your will if any of the beneficiaries died, there are new additions to your family or the families of your heirs, your executor died or moved away, changed residency, increase or elimination of assets, change in the beneficiaries.

Legal Considerations in Making Contract

There are activities and situations that require an understanding of the law for the retiree. Ask a lawyer’s help in interpreting and applying the law properly. One of the most common legal involvement most retirees have concern is contract.

First and foremost rule is never sign a contract without understanding it thoroughly and without crossing out or filling in the blanks. Second, never let anyone talk you into signing a printed form. A contract is made when someone makes an offer and someone else accepts. Contracts can include insurance policies ( life, health, property, auto); bank accounts ( savings, checking, safe deposit boxes, loans, savings certificates); charge accounts, and credit cards; and agreements to buy, sell of lease property.

Contracts should be in writing to be fully and legally binding on both parties. If a contract is altered, both parties should initial the changes made on the form. See to it that a written contract be made when there is selling of any interest in real property or leasing it for more than a year. Assignment of life, health, or accidental policy or a promise to name someone beneficiary of such, employing the services of a real estate agent, establishing a trust, a contract extending more than one year or one that is lifelong.

Know what your rights are when you finance the purchase of expensive items such as car, major appliances, or furniture. Know that the seller will retain some right to that property if the buyer defaults in payment.

Other instances wherein you must know your legal rights and obligations are when you set up a business ( licensing fees, labeling, and food laws, etc.), make a second marriage ( prenuptial agreement ), caring for an ill or incompetent person ( special power of attorney, general power of attorney).

Some Pointers in Negotiating a Fee with a Lawyer

Before you hire a lawyer, inquire how much it would cost you. An attorney would generally size up the problems, name his fee and the client would be expected to agree. It is a sound and safe practice to put your agreement with a lawyer in writing: either a formal contract or a letter of understanding.

The contract should contain the following:

1. Name of parties.
2. Detailed statement of the services of the lawyers agreed to perform.
3. A commitment on the part of the lawyer to provide you with regular detailed and itemized bills.
4. A fee structure and projected range of ancillatory costs.
5. A timetable for the completion of work.
6. An attorney’s promise to answer your questions.
7. A promise on your part to pay the fee and cost within a week to 10 days of receipt of the bills.
Different lawyers have different ways of billing. It can be:

1. Flat Fee – A stated peso amount for services.
2. Percentage Fee – the fee will be calculated as a percentage. It may be one-half to one percent of the sale price.
3. Hourly Fee – the fee can be handled on an hourly basis.
4. Cost-in-addition-to-the-Fee – These are the additional payments for the other costs.
SOURCES OF INCOME FOR THE RETIREE

What kind of income will you need when you retire? Where will the money come from? How much will you have? How adequate will it be? Where can you get more if you need it?

A must in pre-retirement planning is taking stock of your financial resources. This is to avoid finding yourself in a tight financial squeeze in your retirement years. The following are the actions you should take to build a secure financial foundation for your retirement years:

1) Know your income picture. Due to the strong extended ties of Filipinos, most retirees receive money from more than one source. Thus, there is a variety of income sources that can contribute to a retiree’s income picture: salary/wages/second career, social security retirement income, employer pension plan, employer profit-sharing plan, deferred compensation, money given by own children and relatives, government securities, corporate securities, savings, life insurance, cash values, sale of business, sale of other assets and other investments.

2) Know what kind of money you will need in retirement. There are four kinds. They are the following:

a) Emergency money to protect yourself and your loved ones and bail you out of unexpected situations or in the event of an emergency. This emergency money should be kept in a commercial, mutual or savings bank, or in a savings and loan association or a credit union because this money should be safe, readily available, and earning interest. Look for the insured savings institution that pays the best true interest rate.

b) Guaranteed money to pay water, electricity and gas. This kind of money can come from Social Security and Medicare benefits, pensions and annuities. The amount of social security check will depend on your average earnings under the social security law.

If you are participating n a private pension plan, understand the plan thoroughly and estimate accurately what your benefits will be. Annuities are contracts sold by life insurance companies which guarantee a fixed payment usually for life, which sometimes may be paid to a beneficiary upon your death.

c) Investment money to keep your head above the rising tide of inflation. The ideal is that investments produce financial growth more quickly than inflation gnaws it away. The forms of investing are preferred and common stocks, mutual funds, real estate, savings bond, government and corporate bonds and certificates of deposits. In investing seek professional assistance to evaluate the ability to convert an investment into cash (liquidity), safety, income and growth of these forms.

d) Extra money, to buy those “best things in life” that really aren’t free. A retiree can have extra money by having full or part-time jobs or by having small business at home. Evaluate carefully the cost of working outside your home and subtract this cost from potential income. Evaluate your personal assets and brush up on interview techniques and resume writing if you hope to work in retirement.

If you are considering self-employment, you may earn money through at home or small businesses that range from consulting to catering. Or you may want to investigate franchising opportunities, that is, the corporate owners of an established brand-name product typically licenses sales outlet but retains control over what is sold and how it is merchandized.

3) Plan how to manage your money. While still young, place on growth investments to keep ahead of inflation. As you grow older, the more you should place on safety and income investment to meet current needs.

Seek money management advice from your banker. Some commercial banks provide personalized portfolio services for larger investors while small investment counselors may be willing to help people with their investment portfolios. You may make trust arrangement with the bank if you have substantial amount of money.

Your valuables can be sold for cash if the need arises. This is to enable you to save money since you will no longer pay insurance on those valuables. In doing this get the advice of a dealer or professional auction house on when to sell your valuable so as to get the best price.

Include in your financial planning any expected inheritance and the form (cash, trust, real property) it will take. As a rule the inheritance should be invested in a way that reflects well on the generosity of the person who made the bequest.

There are several alternatives in managing your life insurance policy. You may take out a loan on your insurance ( usually available at a lower interest rate than bank or credit loans) to help finance your retirement. You may use the cash value of your policy to continue protection on an extended term basis or take out the cash value of your policy in a lump sum and invest the money elsewhere. Or you may continue your insurance policy, but with reduced coverage. Under this option, you no longer pay premiums and the face amount of your policy is reduced. Finally, you may close an annuity settlement, which could be used to provide guaranteed income for life or for another fixed period.

Regarding sale of your present house to achieve your retirement goals, take your time. Consider the tax implications.

4) Set your goals and then determine whether your income will meet those goals. Bridge the gap, if any between your income and expenses. Invest wisely surplus funds.

WORKING OPTIONS FOR THE RETIREE To counteract the effects of inflation on pensions and social security payments, there is a need for some retirees to look for a full or part-time work in retirement. Since social security and pension payments are usually fixed, income-producing work has become increasingly necessary for them.

Why do people work in retirement? A retiree works due to several reasons: it can be because of money, status, structure, friendships or feeling of usefulness. Some special concerns of older people in looking for work are: where to work, when to work, what work to do and, how to work. With regard as where to work, they can work within a mile from home, in urban center, in suburb, in rural area, indoors, outdoors, both indoors and outdoors, large company/organization, small company/organization at desk or station, highly mobile, or be self-employed at home or at a shop/office. With regard when to work, a retiree can consider working 30-40 hours/week, 20-29 hours/week, 10-19 hours/week, less than 10 hours/week, 5 days/week, 4 days/week, 3 days/week, 2 days/week or 1 day/week.

In deciding what work to work on, a retiree has the option of choosing among work which deal with things, deal with people or deal with data; same work as now, similar work to now, and different work than now; service work, manual work or office work. He must consider his current skills and new skills. He must also consider whether he enjoys working alone, working in a team or both; fast pace, steady pace, or slow pace; a lot of travel, some travel or no travel.

The following are the steps to be taken if a retiree intends to work: First Step: Estimate amount of earned income you need in retirement and figure out if amount would affect social security benefits. Second Step: Estimate cost of working (clothes, food supplies, equipment, etc.). Third Step: Inventory your work and personal skills and accomplishments, and decide what you like and don’t like about working. Decide also on the type of work you want to do. Fourth Step: Identify strengths and weaknesses; decide how to emphasize strengths. Fifth Step: Decide if more training/education is needed; where to get it and cost. Sixth Step: Select locale where you want to work. Seventh Step: Develop lists of contacts and identify potential employers. Identify the person who can hire you; Eight Step: Prepare resume and cover letter. Ninth Step: Learn how to follow-up on an interview.

If you are intending to put up your own business the following are the steps: Step 1: Determine how to finance a new business. Step 2: Research regulations affecting this type of business. Step 3: Estimate cost of marketing and distributing your product or service. Step 4: Consider the time and energy commitment the work involves.

Many employees are retiring earlier, taking second or even third careers and working on into their later years. According to a survey of 200 retired presidents and chief executive officers by an extensive search company, Russel Reynolds Associates Inc. (Roy Hill “Retirement: The Launching Pad for New Careers”; International Management; August 1985 pp 20-21) the kind of activities retired senior executives get involved in are the following:

Board of Directors/Advisory Committee………………32%
Consultancy ………………………………………………………...19%
Business ……………………………………………………………..18%
Philantropic Activities ………………………………………...13%
Education …………………………………………………………… 5%
Corporate Position ……………………………………………. 5%
Politics/Government ………………………………………….. 4%
Law ……………………………………………………………………… 4%

FINANCIAL PLANNING FOR RETIREES

What are the basic elements of financial planning? What are the possible sources of income for a retiree? How can a retiree control the gap between income and outgo? How can a retiree cut expenses?

For the retiree, financial planning is a must; his main source of income will cease, or will be substantially reduced. He must take steps to assure that his income will at least match, if not exceed, his expenses, both now and in the foreseeable future. Financial planningdictates that he must either replace that lost income or cut expenses to bring them in line with his actual future income. Income vs. outgo becomes the name of the game for the retiree.

The basic steps in financial planning are the following:

1) Define your current income and current expenses (budget) to have a picture of your current situation and know how much is your “discretionary income” ( the income that’s left after one has met all his basic expenses).
2) Project whether your assets and debts will increase or decrease to know whether you’ll have more or less discretionary income next year.
3) Identify your actual sources of income at retirement and at various points in retirement.
4) Do your retirement spending plans to clearly define and assign priorities to your basic needs and goals. Assure funding for basic living requirements such as food, clothing, housing and transportation.
5) Plan the steps you can take between now and retirement to help meet your goals either by putting to non-productive assets, investment.

To know with as much certainty as possible how much money you’ll receive, from which sources, and for how long is sound financial planning. The most important sources of income for the retiree are social security, pensions, and investment income, investment principal, house equity, life insurance equity, income from work and inheritances. Social Security is just a supplement to a retiree’s basic retirement program; it was never meant to be the sole means of support for the retiree. Pensions can be given on a lump sum or monthly distribution basis. A good investment portfolio should be geared toward preserving capital and enhancing the income received from it. Avoid the “get rich quick” mentality; some investment opportunities are too good to be true. If retiree sells his house and buys another smaller, more modest one he can free a substantial amount of money for investment or living purposes. If he has carried life insurance for a long time, he will have some attractive choices concerning his equity in the policy.

Retirement Expenses can be classified into five. They are the following:

1. Emergency Funds
2. The Essentials
3. Leisure Pursuits
4. A “Stake” for yourself or your children
5. Caring for dependents

A retiree may spend his leisure time at high cost ( golfing, entertaining, dining out) or at a low- or no-cost ( gardening, reading or volunteer work). Estimate how and at what cost the chosen leisure time the retiree will be engaged.

When a retiree has projected his future income and expenses, he may be lucky and find he has a surplus – more money available than he planned to spend. The most common phenomenon, however, is the opposite: he will find more expenses than income can cover. To prevent this occurrence, here are some cutting expenses tips.

1) Examine your budget and cut down on areas where you can cut down.
2) Time your shopping and take advantage of discounts and special sales.
3) Save money by learning how to fix things and to perform household repairs;
4) Try local and generic products.
5) Purchase larger packages instead of small ones.
6) Buy only what you need; not all your wants.
7) Get substantial discount by using bulk-buying techniques.
8) Avoid the high interest rates of accounts by paying your bills promptly.
9) Avoid overpaying income taxes by knowing the tax regulations.
10) Minimize credit shopping.
11) Take advantage of opportunities for swapping services.

A retiree may also increase his income by the following ways: 1) Convert his assets to cash and invest it; 2) Take a part-time or full-time job; 3) Increase the yield from investments.

He can convert his assets to cash by having a garage sale of his properties or items which have ceased to be meaningful or useful to him. He can consider automatic dividend reinvestment plan whereby his dividends are used to purchase additional shares of stocks, which then go to work for him to earn still more dividends. He can keep his fixed income investments flexible by having a variety of maturities, that is, keep one-third of the total at under one year maturity, one-third in the one-to-three-year range, and one-third in the three-to-five-year range.

To maintain the purchasing power of your peso in inflationary times, put your savings into financial institutions or take advantage of investment opportunities that pay interest or dividends equal to, or, if you’re lucky, in excess of the rate of inflation after taxes are paid.

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Various articles reprinted from the book Guide to Happy Retirement by Tomas Quintin D. Andres