A lot of us dream of retirement – those golden years when we can finally sit back, relax, and enjoy the fruits of our labors (a.k.a. our grandchildren).
But how many of us are truly ready for the time when we actually get to retire?
It is a widely accepted financial rule that people, in order to maintain their current standard of living, should have at least 70% of their current income after they retire.
Now let’s look at the retirement plan held by most of us: our government pension. Let’s say you’re earning P15,000 per month, and you need 70% of that after retirement.
If you’re a GSIS pensioner, your government pension will reach 70% of your current income only after you’ve been paying contributions for 27 years, based on the GSIS online calculator. On the other hand, if you’re an SSS pensioner earning the same amount of money, you will need to be paying contributions for 34 years, according to the computation guidelines on the SSS website.
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But what happens if you’re earning more than 15k?
With GSIS, no matter how much you earn, you’ll be getting 70% if you are a contributing member for 27–28 years. This is because GSIS has no salary ceiling – at least, for now.
However, it’s a completely different story for SSS members, because SSS has a P15k income ceiling. So even if you’re earning P100,000 per month right now, SSS will still compute your pension based on a P15,000 maximum salary credit. Imagine what sort of dent that will make in your budget when you begin to depend on your SSS pesion!
The takeaway here is that, for many of us, government pension is not enough to support us during retirement. We have to find another way to save and prepare.