Personal Finance Tips for Freelancers: How to Save for Retirement?

Freelancers retirment plan

Regular employees get to pay premiums that are automatically deducted from their salary on monthly basis. These premiums will go directly to their retirement plans like Social Security System (SSS), Pag-ibig Fund and GSIS (for government employees).

Every local employee paying premiums will get to enjoy these benefits in his senior years when he reached his retirement age. But they can always apply for multi-purpose loans, sick leave benefits, maternity leave benefits, calamity loans, etc. in the middle of the term.

Unlike any type of  regular jobs, Filipino freelancers position themselves as self-employed. Though, they are employed under contract by foreign agencies, they work from their homes. They get to pay their own premiums. They don’t receive any benefits paid by their employer for their monthly premiums. They get to pay all of them in full.

The problem is that, not all Filipino freelancers are aware of their retirement. They don’t save for their retirement at all. Though, they are paid higher than any local employees, they always forget to set aside money for retirement.

How Do You Plan For Retirement?

I know lots of freelancers have lots of money. The question here is, how smart are they when it comes to personal finance? Where do they put their money? Do they just hide their money in the banks?

I am a freelancer, working for almost 3 years. My biggest mistake back then was when I didn’t pay my SSS premiums and Pag-ibig contributions right after I jumped off from my previous local company. But it’s never too late, so they say. One year later, I promised to take a closer eye on my monthly premiums and I’ve never missed a month of paying up to this day. Glory to God!

What I wanted to say is freelancers like me should take their retirement seriously. Though we don’t have employers that remind us to pay our premiums, we should do that for ourselves. That’s why, we chose to work for ourselves in the first place.

How Much Do You Save for Retirement?

It is not enough to just be aware of our monthly premiums for retirement purposes. And it is not enough to just pay the lowest premiums. If you can afford to pay the highest premiums, go for it!

SSS or Social Security System has this contribution table where you can see how much you would pay based on your monthly income.

See image below:

sss contribution table

If you are earning Php 10,000 per month, you got to pay 1,100 every month for your SSS premiums. If you earn higher than that, you got to pay higher than that. Later, you got to enjoy the benefits like no one else can if you follow these guidelines.

It doesn’t always mean you are obliged to follow what’s printed on the contributions table. Keep in mind; “higher premium means bigger benefits.” You’ll get to experience this when you apply for loans, income protection benefits, maternity benefits, and when you reached retirement.

Another investment vehicle for retirement is the Pag-ibig Fund. Pag-ibig is a government-owned mutual fund facility that focuses on providing housing assistance to the members of the fund. Not only that, it also provides multi-purpose loans, calamity loans, savings and investments through their Pag-ibig Modified Fund II.

Pag-ibig fund’s primary purpose is savings, where contributors can earn dividends by the end of the calendar year. The earnings can be accumulated and withdrawn only after 120 months or 10-year maturity period. The biggest amount to contribute would be 500 pesos per month and the lowest is 200.

On the other hand, Pag-ibig Modified Fund II is meant for savings or investment that matures every 5 years. Any individual who is already a Pag-ibig member can apply for the Modified Fund II. This is non-loanable savings account that requires contribution for at least 500 pesos a month up to infinity.

I will discuss more about SSS and Pag-ibig Fund in my next posts.

The Philosophy Behind Saving for Retirement for OFWs and Freelancers

I just explained in the aforementioned paragraphs how to strictly save for retirement in the 2 biggest and famous government-owned retirement fund facility that are made available to us all. Do not wait for the sky to fall, grab the opportunity before it’s too late!

Putting all your money in SSS and Pag-ibig until you reached 60 is not your best move. They both have 120-month rule. That when you are done paying your contributions for 120 months, what’s the point of paying for them for the rest of your life? When you’ll only receive the same amount of pension every month?

I want you to understand that SSS retirement plan is non-accumulative. In other words, no matter how much money you put in your SSS account, you’ll still receive the same retirement pension just like everybody else. Ask your grandmother or grandfather how much pension they received each month and ask them how many years did they pay for them. I would bet, ever since they started working! It doesn’t make sense.

So, what’s the real deal?

As a freelancer, we are not obliged to pay those premiums every month until we die. So our best move is find another investment vehicle where we could put our money in. When you are done paying all SSS and Pag-ibig premiums for 120 months, don’t put all your money in the bank. You will be affected with inflation and you’ll lose your buying power.

I suggest to learn more about stock investing. Research on how to invest in the stock market. Find a financial advisor who can walk you through about investing and how much risk you can afford. I will tell you more about investing when I am already well-versed of the market.

For now, read books. I recommend reading Rich Dad Poor Dad by Robert Kiyosaki, My Maid Invests in the Stock Market And Why You Should, Too by Bo Sanchez and Stock Smarts by Marvin Germo.

These books are helpful for first time investors or those who have no idea what stock market is all about. These books will walk you through and give you an overview what your retirement would be like when you start investing in the stock market today.

Do research. Have fun. Don’t forget to go back to the Lord, always! God bless!


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