Some Common Mistakes People Make When Planning for Retirement

Focus on Dreams of Retirement 

Retirement could be some several years ahead but how you handle your finances would determine how efficiently you could manage your post-retirement life. Focusing on dreams of retirement could be the initial step, where planning and working towards your dream goals could eventually lead you there. Often there seems to be some errors which can be avoid in reaching your goal.

Refraining from creating a retirement road map

A retirement road map needs to be done in order to know what the person may want to do, how much is needed to save and how one would intend achieving their goals. The best way to map the retirement plan is to envisage what the retired years ahead would look like, which will provide an idea on how to be prepared for the same.

No knowledge on how much is needed at the time of retirement 

An individual at the age of 55 has plans of retiring at 60 and has saved around 50 lakhs for his retirement. But in order to maintain his present lifestyle for the future, he needs to have a saving of at least Rs 3 crores. Having just five years to retire with shortage of Rs 2.5 crores, he may face difficulties in the future.

Not investing early 

Mr A and Mr B had followed a disciplined process of investing and both had invested Rs 10,000 each year. But Mr B had started investing at the age of 25 and had stopped at the age of 35 while Mr A had started investing at the age of 35 and had continued till the age of 65. When both of them retired at 65, Mr B would have as much as 2.5 times the amount as Mr A inspite of him investing for only 10 years in comparison to Mr A who had invested for 30 years. This is known as the power of compounding. The effect of compounding is appreciated when adequate time is given for the money to grow. The sooner one starts saving, the earlier you can retire.

Not including the possibilities like health care expenses in retirement plan 

Medical expenses during retirement are the most common possibility which is needed to be taken in consideration. A single medical bill could drain out the savings in one go. One should ensure that some emergency funds are assigned to handle the health care expenses in old age. Post retirement, ensure on the factors of the costs of medical insurance and health care expenses and plan for retirement corpus.

Avoiding in making intelligent investment decisions 

Mr A had invested in a bank FD which offered a 9% return and though it seemed to match inflation rate, he did not check into account the impact of taxes on his returns. Being in the 30% tax bracket, his net return fell a bit over 6% less than the inflation rate. Investments can be done in company shares or equity mutual funds which would give the inflation a beating return in the long term that will help in hastening up the retirement corpus growth as well as get started with lower monthly savings. While planning for retirement, it is essential to apprehend where one would want to be, to know what one needs to do to reach their goal.

Philippine Crop Insurance Corp released Php54.7M insurance claims in CV

Insurance claims paid out by state-run Philippine Crop Insurance Corp. (PCIC) to insured farmers in Central Visayas affected by calamities reached Php54.7 million as of end-November this year. Also, the PCIC free insurance coverage for farmers affected by super typhoon Yolanda in 2013 is only until this year, as decided by its board.

Citing official data, PCIC Regional Manager Crescencio Deligero Jr. said the agency distributed indemnity checks to a total of 7,282 farmers in Region 7. Indemnity is the compensation for damages or losses.

As of November, Deligero said the agency has insured a total of 207,806 farmers, already exceeding its target to insure 153,000 this year. The claims paid out by PCIC include all its insurance lines: rice, corn, high-value crops, livestock, non-crop agricultural assets and term insurance package.

Bulk of the claims were paid for rice and corn at Php24.6 million and Php21.5, respectively.wherein most of the reported losses were due to the typhoons that previously hit the region and the effects of the ongoing El Niño phenomenon.

The state-run agricultural insurer has allocated Php60 million this year for 47,278 farmers in northern Cebu which was heavily hit by Yolanda. As of last month, claims by 1,908 farmers who were covered by the free insurance reached Php13.7 million.

The insurer also offers farmers free coverage in its Registry System for Basic Sectors in Agriculture and the Agri-Fishery Insurance Program of the Cebu provincial government.

Disaster-prone PH sees rise of microinsurance

Wider range of affordable products helped further expand microinsurance coverage in the country to 31.1 million in 2014, a report published by the German International Cooperation (GIZ) showed.
GIZ’s Regulatory Impact Assessment of Microinsurance in the Philippines published last month noted of a growing number of insurance companies that had ventured into microinsurance.

“Out of the 138 insurers in 2014, 63 are engaged in some form of microinsurance, from 52 of 138 in 2012. Microinsurance has become an important addition to the insurer’s markets and in 2014 it represented 62 percent of all insurance coverage with 1.9-percent share of total premiums, up from 47 percent of industry insurance coverage and 2-percent share of total premiums in 2012,” the report cited.

Alongside the increase in firms engaged in microinsurance was a rise in the number of agents selling these cheaper alternatives. “The number of microinsurance agents licensed and active has grown to 170 at the end of 2014. There are 122 individual agents and 48 rural bank agents (although an additional 13 rural banks are fully licensed to offer microinsurance as agents, though they are not yet actively selling microinsurance products).”

As a result of more microinsurance players, “the number and diversity of products has improved considerably,” the report said.

“As of end-2014, 162 products were registered out of which 81 are life products and 81 non-life. This is a sharp increase compared to 2009 when only 18 products … had been approved,” it said.
Hence, a larger number of Filipinos bought microinsurance coverage last year, bringing the 2014 microinsurance penetration to 31.1 million, up from 19.8 million in 2012 and 2.9 million in 2009.
It helped that many Filipinos also found how microinsurance works after being devastated by natural calamities and disasters, GIZ said in a statement.

“Insurance providers have responded effectively after Typhoon ‘Yolanda’ (international name: Haiyan) in November 2013, paying out more than one hundred thousand microinsurance claims within the first three months, amounting to approximately half a billion pesos. The average amount per claim paid was P4,777,” it noted.

“Clear policy direction and proportionate regulatory guidelines provide the driving force to insurance market development. It provides certainty for the industry to invest in microinsurance activities. It gives public confidence to trust microinsurance products. The good numbers in microinsurance, as elaborated in the report, is a product of multi-stakeholders dialogue and cooperation.” Insurance Commissioner Emmanuel F. Dooc was quoted by GIZ as saying.

“The Philippines is a leader in inclusive insurance measures among countries in Asia. The country has proven that microinsurance works and could be sustainable using full market-based approach. The role of government in providing clear policy directions has enabled the private sector and other stakeholders to contribute to the advocacy of microinsurance market development,” said Finance Undersecretary Gil S. Beltran.

Last October, the Insurance Commission came out with the Enhanced Microinsurance Regulatory Framework, which was aimed to “enhance the regulatory environment for microinsurance in order to broaden the scope and deepen the outreach of microinsurance providers without sacrificing their viability and sustainability, and protect the consuming the public.”

-- Inquirer.net

Expensive nonlife-insurance policies as house abandons tax-rate cuts

Philippine Insurers and Reinsurers Association (Pira) is no longer hoping the proposed bill on the lowering of tax rate on nonlife-insurance products will ever be enacted under President Aquino. Pira Chairman Michael Rellosa said many of the country’s legislators are already in campaign mode, as indicated by the lack of quorum at the House of Representatives the past few months.

The proposed bill that will lower the tax on nonlife-insurance products had been pending during the 16th Congress, no matter the strong support from Insurance Commissioner Emmanuel F. Dooc.

The tax imposed on nonlife-insurance products in the Philippines is said to be the highest in the world, equal to 24.5 percent of the total premium paid for nonlife-insurance products, and 26.5 percent for fire insurance.

Nonlife-insurance products are levied a 12-percent  value-added tax and another 12.5-percent documentary-stamp tax. Fire insurance is slapped an additional 2-percent fire service tax. On top of these taxes, local governments also impose 0.15 percent up to 0.17 percent in municipal tax for property insurance.

Singapore only imposes a tax of 7 percent on nonlife-insurance policies, while Thailand imposes 11.3 percent.

Finance Secretary Cesar V. Purisima was earlier reported to have opposed the lowering of the tax, although he once supported the proposed 5-percent tax on nonlife-insurance products, which was a compromise with the insurance industry, which earlier proposed for a 3-percent tax.

The lowering of the tax on nonlife-insurance products would have been appropriate with the previous lowering of taxes by the Arroyo administration on life-insurance policies, with the old tax of 5 percent being lowered further to only 2 percent to boost the competitiveness of the country’s life-insurance industry.

Rellosa said the lowering of the tax on nonlife-insurance premium would also have been in line with the government’s new policy of promoting microinsurance as a tool for the financial inclusion of the poor, because most microinsurance products are nonlife-insurance products that provide cover for property loss.

But, as  it turns out, with the shelving of the measure on  nonlife-insurance  products, these were touted as the poor man’s protection against loss of property and income during times of natural calamities.

Such will continue to be levied a very high tax rate of 24.5 percent.

-- Business Mirror

Insurance firm bares first infra investment in Philippines

Sun Life Philippines is entering its first infrastructure investment as the life insurer continually seeks for long-term assets, an official said. “As an insurance company we’ve always been in search for long-term assets,” Sun Life Chief Investments Officer Michael Gerard Enriquez said in a press conference Wednesday.

The company has announced its first foray into power generation in Mindanao. “What better way to invest our excess cash and help in nation building by looking at some of infrastructure projects,” Enriquez said.

Enriquez revealed the company is in the process of closing its first financing deal for a 600-megawatt coal-fired power plant in Mindanao, which is expected to be operational by the third quarter in 2018.

Enriquez declined to give further details yet.

On another matter, Sun Life President and CEO Rizalina Mantaring said the life insurer has set a target to insure five million individuals over the next five years from the current 1.2 million.

The target is part of its goal to boost the financial literacy among Filipinos as insurance penetration in the country currently stands at less than 5%. When micro-insurance is included, the penetration rate is at 20-30%.

“We want to reach to all segments of the population especially those who need it more,” Mantaring said in an interview.

The Canadian company announced that it achieved its five-year plan ending 2015 which includes reaching 5,000 financial advisors, Php5 billion in annualized first year premiums, Php5 billion in net income and Php50 billion in assets under management.

Sun Life ended the first half of 2015 with total premium income of Php16.3 billion, ranking first in the Philippines life insurance sector.

-- Philstar

Microinsurance products for local farmers pushed

To help farmers quickly replant damaged crops due to extreme weather conditions and, thereby, help temper food inflation, the Department of Finance’s chief economist is pushing for the immediate rollout of the Insurance Commission’s agriculture microinsurance or “MicroAgri” framework.

In an economic bulletin on Friday, Finance Undersecretary Gil S. Beltran said the rise in inflation to 1.1 percent in November from the record-low of 0.4 percent in the previous month “can be attributed to the sharp rise in vegetable prices as a result of Typhoon ‘Lando,’” that hit many parts of Luzon, including farms and plantations, last October.

“The increase in vegetable prices contributed 0.4 percent to the total inflation rate” in November, Beltran said.

Last month, the faster increases in the prices of corn, fish, meat and vegetables offset the slower rise in the prices of cheese, eggs, milk, non-alcoholic beverages and rice, the National Economic and Development Authority said on Friday.

As farmers had already been replanting crops destroyed by “Lando,” Beltran said he expected the typhoon’s adverse impact on prices to wane.

He said supporting farmers to quickly recover from natural disasters and calamities was important to temper food inflation.

“This emphasizes the need to immediately launch the MicroAgri framework and start marketing new microinsurance products for farmers. In the future, the new microinsurance product will enable farmers to undertake replanting quickly,” he said.

In October, the Insurance Commission issued MicroAgri, which “provides a clear-cut policy on agriculture insurance to encourage the private microinsurance providers to innovate and design products tailor-fitted to the needs of agricultural clients.”

With the MicroAgri framework in place, the Insurance Commission was hoping to “promote and encourage the provision of agriculture microinsurance products and services that are simple, affordable and accessible to the vast of the population dependent on agriculture.”

The Insurance Commission wants to leverage on the country’s strength in microinsurance—the Philippines is widely regarded as a model in microinsurance penetration, with 28 million of the 32 million insured Filipinos to date covered by cheap microinsurance plans.

-- Inquirer.net

Life is Unpredictable

For you who are planning for retirement fund till eternity, bad news. My cousin passed away recently at 41 years old. Rest in peace...

Not to fret, our life expectancy are increasing:

Life Expectancy at Birth

*Data from 1980 onwards refer to the resident population.
Data for 2014 are preliminary.

- See more at: http://www.singstat.gov.sg/statistics/visualising-data/charts/life-expectancy-at-birth#sthash.4puPpFz1.dpuf

This reminds us that it is an art to live every day like it is your last, and plan your finance like you live forever. To learn this art is a lifelong journey.

Averagely, we are expected to live to >80 years old. Who knows how long our journey will be? Go chase your rainbow!