Be honest. When you hear the word “retirement,” what pops into your head?
Maybe you think it’s for older people. Maybe you tell yourself,
“I’ll think about that once I’m earning more.”
Right now, you’re focused on the present — working hard, paying bills, helping your family, maybe even just trying to stay afloat.
And I get it. I’ve been there too.
But here’s the truth:
The earlier you start planning for retirement, the less pressure you’ll feel later on.
Take my parents, for example. They’re now retired and thankfully, they don’t rely on us financially. I’m grateful for that.
But sometimes I wonder: What if they had a little more? More room to breathe. More room to enjoy life. To travel. To spoil their grandkids. To buy what they want without thinking twice.
The reality is, not every senior has that kind of freedom. Some are still working well into their 70s. Others rely completely on their children just to make ends meet.
And honestly? That’s what made me pause and really think about my own future.
Because if I want peace of mind when I’m older, if I want to retire with dignity and choices, then I have to start preparing now, while I still have time.
Understanding the Time Value of Money (TVM)
The Time Value of Money, or TVM, is a basic idea in finance that says:
A peso today is worth more than a peso in the future.
Why? Because money you have now can grow — if you save or invest it. The longer your money has time to grow, the bigger the results.
Example:
- If you have ₱1,000 today and you invest it at 7% annual interest (like Pag-IBIG MP2), after 1 year, it becomes ₱1,070.
- But if you delay and save it next year instead, you’ll have less time to earn interest.
In other words, the sooner you start, the less money you need to reach your goal.
What Happens If You Start Late?
Let’s say you want to retire at age 60 with ₱5 million in your retirement fund.
Here’s how much you would need to save monthly, based on what age you start, assuming your investment earns 7% annually (like Pag-IBIG MP2):
| Starting Age | Monthly Savings Needed | Years to Save | Estimated Total Investment |
|---|---|---|---|
| 25 | ₱4,000 | 35 years | ₱1.68M |
| 30 | ₱5,800 | 30 years | ₱2.08M |
| 35 | ₱8,700 | 25 years | ₱2.61M |
| 40 | ₱13,300 | 20 years | ₱3.19M |
Not all savings accounts or investments grow at the same rate. Some are safer but grow slowly. Others are riskier but have the potential for higher returns.
Here’s a comparison of how ₱1 million can grow over 20 years, depending on the annual return:
| Annual Return | Investment Type | Value After 20 Years |
|---|---|---|
| 2% | Regular savings account | ₱1.49M |
| 5% | Conservative mutual fund | ₱2.65M |
| 7% | Pag-IBIG MP2 | ₱3.87M |
| 10% | Aggressive stock fund | ₱6.73M |
Even a small difference in returns, like 5% vs. 7%, can make a big impact over time.
That’s why choosing the right place to grow your money matters.
Choosing Where to Invest: What’s Right for You?
You don’t need to be a financial expert to start investing for retirement — but you do need to understand two things:
-
How much risk you’re comfortable with
-
How much time you have before retirement
Let’s break that down.
What Is a Risk Profile?
Your risk profile is how comfortable you are with the possibility of losing money in the short term, in exchange for the chance to earn more in the long term.
Here are three common types:
| Risk Profile | Description | Example Investments | Ideal For |
|---|---|---|---|
| Conservative | Very careful. Prefers stable, low-risk options | Pag-IBIG MP2, Time deposits, Bonds | Nearing retirement or nervous about risk |
| Moderate | Balanced. Can handle small ups and downs | Balanced mutual funds, UITFs | Mid-career savers with 10–20 years to go |
| Aggressive | Comfortable with risk for higher returns | Stocks, Equity mutual funds, PERA Stocks | Younger savers or long-term investors |
There’s no one-size-fits-all. Your choice should match your comfort level, income, and goals.
Why Diversification Matters
Ever heard the saying, “Don’t put all your eggs in one basket?”
That’s what diversification is about. Instead of putting all your money in one type of investment, you spread it out across several, so if one underperforms, others can balance it out.
For example:
-
50% in Pag-IBIG MP2
-
30% in balanced mutual funds
-
20% in stock market
This mix allows you to grow your money while still managing the risk.
Diversification is especially important for long-term goals like retirement, where consistency matters more than short-term gains.
Investment Options for Filipino Retirement Savers
Here’s a summary of some of the most accessible options in the Philippines:
| Investment | Expected Annual Return | Risk Level | Pros | Cons |
|---|---|---|---|---|
| Pag-IBIG MP2 | 6%–7% | Low | Government-backed, tax-free earnings | 5-year lock-in period |
| Time Deposit | 1.5%–2.5% | Very Low | Safe, fixed return | Very low growth |
| Balanced Mutual Fund | 5%–7% | Moderate | Long-term growth with less volatility | Not guaranteed, may fluctuate |
| Equity Mutual Fund | 7%–10%+ | High | Higher potential returns | Volatile, needs long-term view |
| PERA Account | Varies (depends on fund) | Moderate–High | Tax-free for retirement | Still unfamiliar to many, limited options |
| Stocks (Direct) | 10%+ (long-term average) | High | Highest potential returns | Requires knowledge and patience |
You can start investing in most of these with as little as ₱500–₱1,000.
How Much Will You Need for Retirement?
Now that you know where to invest, the next question is: How much should I save?
This depends on your retirement lifestyle.
Let’s say you want to receive ₱30,000/month for 20 years after retirement.
That’s ₱360,000/year × 20 = ₱7.2 million.
Assuming you invest your money at 7% per year even in retirement, you’ll need around ₱4.8–₱5 million saved before age 60 to achieve that income.
This is where the Time Value of Money helps again. If you start saving early, you can reach that goal with smaller monthly contributions.
Simulated Growth of ₱1M at Different Returns
Let’s see how one-time investments grow over time depending on the return rate:
| Annual Return | After 10 Years | After 20 Years | After 30 Years |
|---|---|---|---|
| 2% | ₱1.22M | ₱1.49M | ₱1.81M |
| 5% | ₱1.63M | ₱2.65M | ₱4.32M |
| 7% (MP2) | ₱1.97M | ₱3.87M | ₱7.61M |
| 10% | ₱2.59M | ₱6.73M | ₱17.45M |
This shows how choosing the right investment and starting early can make a massive difference.
How to Start Your Retirement Plan Today
Don’t let the numbers overwhelm you. What matters is getting started, even with a small amount.
Here’s a simple 5-step action plan:
1. Set Your Retirement Goal
Decide how much you want to live on monthly in retirement. Multiply it by 12 months × number of years you want to be retired.
Example: ₱30,000/month × 12 × 20 years = ₱7.2 million
2. Check How Many Years You Have
Subtract your current age from your target retirement age.
Example: If you’re 30 now and want to retire at 60, you have 30 years to grow your money.
3. Pick an Investment That Fits Your Risk Profile
Use the guide above to choose where to place your money — whether it’s MP2, mutual funds, or a mix. Ask yourself:
-
How much risk can I handle?
-
How long am I willing to keep my money invested?
4. Decide How Much to Save Each Month
Use our free Time Value of Money calculator + worksheet to help you estimate your monthly savings goal based on your target fund, years to grow, and expected return.
5. Make It a Habit
Treat your retirement savings like a non-negotiable monthly bill. Set an auto-debit from your bank account. Track your progress every year.
Retirement Is a Long Game, But a Worthwhile One
Retirement may feel far off, but the truth is, it’s getting closer every year. And you don’t want to reach 60 and realize you waited too long.
The best time to start planning was yesterday.
The second-best time is today.
Even if you can only save ₱500 or ₱1,000 a month now, that’s a great start.
With the power of compound interest and smart investing, small amounts can grow into big results over time.
And when you reach that stage in life, you’ll be glad you made this choice — not just for yourself, but also for your family. Because retiring with dignity and independence is one of the greatest gifts you can give your future self.