Philippine economy

[OPINION] When it comes to your finances, is longevity a blessing or a curse?

Carmela Zabala

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[OPINION] When it comes to your finances, is longevity a blessing or a curse?

Guia Abogado/Rappler

How do you make your retirement money last?

Knowing your longevity is an existential question, but it certainly matters for practical  reasons. 

The new report by GFLEC and TIAA Institute shows that longevity literacy is an important topic in retirement planning, particularly for women, as they tend to live longer than men and therefore spend more time in widowhood. 

The study further reveals that women have longevity knowledge but low financial literacy. Another study [by Lusardi et al] shows that women tend not to plan. 

Given the uncertainty and complexity of the economy, pension systems, public health, and financial markets, longevity can be considered a risk. 

The report says that it is important to know how long you will live so you can save enough money to last as long as you live. 

The authors of the report suggested designing a holistic approach to retirement planning, which includes health and social fitness to achieve a healthy retirement lifestyle. This exactly makes sense because money, relationships, and health are cyclical. 

Although money can’t buy everything, studies showed that financial distress correlates with struggling relationships, poor health, and lower work productivity. 

How do you make your retirement money last?

You may consider saving and investing as early as you can, preferably on the day you receive your first paycheck, and start building a portfolio one step at a time that includes social security, an emergency fund, life and health insurance, and investments in assets and businesses that generate passive income. 

In the Philippines, for generations, retirement is a whole family affair. Adult children step into the lifetime care of their parents, supporting them not just emotionally and socially, but more so financially. This reflects the study that most Filipinos are not ready for retirement and have to rely upon family members and the shaky and measly social security. It is predominant for working Filipinos and many young people to start their adult life by taking charge of the retirement needs of their parents. 

This unique retirement situation in the Philippines has critical implications in the financial planning consideration of each family member. 

The proposed reforms in the retirement and pension system in the Philippines put employees and the self-employed in a position to take full responsibility for the management and investment decisions of their retirement, which requires a robust financial education program to empower Filipinos to decide the trajectory of their lives and advocate for themselves and others. 

This task requires the cooperation of the entire community, government, employers, associations, community organizations, and the education sector to commit to making financial literacy accessible to everyone. 

Call to action

Employers

Employers can leverage the power of community that already exists within the workplace to reach a diverse demographic segment, such as women, and act as a conduit for large-scale behavioral change and social transformation to happen. 

The call to action for employers is to make financial literacy accessible, visible, and available to all employees anytime – not just a one-off event every year, but an integral part of employee care, from onboarding through to retirement, supporting employees in navigating different life events. 

Employers may consider that all new hires must have a financial plan and no one should retire without it. 

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Schools

How do we get schools to teach financial literacy and inculcate retirement readiness from an early age? 

If schools can create room for other subjects and extra-curricular activities, it is possible to integrate financial literacy into the curriculum as a required course for students, to equip them with life skills and knowledge to thrive in an increasingly complex environment. 

Schools can partner with organizations that offer unbiased financial literacy courses. 

There are tons of research that show that the age of a person has a direct correlation to behavioral change, as young people are in the process of developing emotional, social, and  financial behaviors. Studies further show that learning is easier for younger people and adults who received financial education at a young age. They become more capable of managing their financial resources than those who did not.

It is important for young people to access financial education in schools because parents or guardians are not always able (e.g. due to a lack of knowledge, skills, time, or motivation) to teach their children about financial matters, and not all workplaces offer financial education. 

Schools have opportunities to own the vision of making lifetime financial security happen in this generation. 

Government

It is the right of every citizen to access financial literacy and to feel financially secure, particularly in their senior years. Policies and legislation should put these rights into practice. Government must expand and safeguard the social security and pension fund, promote its sustainability, adequacy, and integrity, and ensure that every citizen has access to it. The Mercer Global Pension Index Study reveals that the Philippines ranks at the bottom in the list of overall index values, specifically in the integrity sub-index. 

Government can show the way to make lifetime income security a reality in this generation.

Individuals

With the proposed reforms in the pension and retirement system (HB 9343 Capital Market  Development Act, from defined benefit to defined contribution), individuals are put in a position to own their retirement plan. Increasingly, they will make investment decisions [e.g.  where to put their funds, etc.] and bear the financial risks of such decisions. 

Individuals have to take a proactive approach to build financial capability and resilience, improve their personal financial outcomes, and commit to lifelong learning. – Rappler.com

Carmela Zabala is the founder of SELFMATTERS, which aims to accelerate the creation of a more equitable and financially secure world for men and women. They do this by creating the most gender sensitive, research-based, and behaviorally designed financial literacy programs for the workplace, women, and young people, and collaborating widely across sectors.

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