How Much Should You Invest To Reach P1 Million Retirement Fund at age 60?

Date Updated:

Summary

You will learn that the amount of investment that you need to invest increases as you age to reach your target retirement fund of PhP1,000,000.00. If you invest in a platform that has an estimated return of 10% per annum, then here are the rates of return

Age Investment/Year Total Interest Income

20 P2,259.41 P909,623.42

30 P6,079.25 P817,622.55

40 P17,459.62 P650,807.50

50 P62,745.39 P372,546.05

In this blog, we will be utilizing the stock market as our investment platform. The advantages of investing money in the stock market are as follows: Note: There is no such thing as a GUARANTEED INVESTMENT RETURN. The ACTUAL investment return could either be lower than the projected, equal to or greater than the projected annual returns depending upon the market performance of the underlying investment assets. Some characteristics of an investment in the stock market are the following:

Investment enjoys compounding interest
Enjoys exponential growth in the long run
You can diversify investment to minimize risks

Earns Dividends
May be entitled to Rights Offer i.e. additional ownership

You will also need to understand that there is a difference between investing and saving:

Saving is safekeeping your money while investing is putting your money into alternative income-generating assets to increase wealth. Therefore, it is erroneous to invest your money in a bank because its purpose is only for safekeeping due to its inability to give high returns.

In the Philippines, the most used online brokerage platform is colfinancial, First Metro, Philstocks, BPI trade, BDO Namura, AB Securities and others. You can also go global by using eToro platform. All of these investment platforms are very helpful.

Let us now elaborate:

Assume Mr. Invest Early, started investing in the stock market at age 20. How much does he need to invest on a yearly basis until age 60 to reach the goal of PhP1,000,000.00 by the time of his retirement, age 60. The estimated rate of return is 10% per annum

Present Value

Rate

10%

PMT

₱2,259.41

NPER

Future Value

₱1,000,000.00

My computation is as follows:

PERIOD	PRINCIPAL	INTEREST	BALANCE
1	2,259.41	225.94	2,485.36
2	4,744.77	474.48	5,219.25
3	7,478.66	747.87	8,226.53
4	10,485.94	1,048.59	11,534.54
5	13,793.95	1,379.40	15,173.35
6	17,432.76	1,743.28	19,176.04
7	21,435.45	2,143.55	23,579.00
8	25,838.41	2,583.84	28,422.25
9	30,681.67	3,068.17	33,749.83
10	36,009.25	3,600.92	39,610.17
11	41,869.59	4,186.96	46,056.54
12	48,315.96	4,831.60	53,147.55
13	55,406.97	5,540.70	60,947.67
14	63,207.08	6,320.71	69,527.79
15	71,787.20	7,178.72	78,965.92
16	81,225.34	8,122.53	89,347.87
17	91,607.29	9,160.73	100,768.01
18	103,027.43	10,302.74	113,330.17
19	115,589.59	11,558.96	127,148.55
20	129,407.96	12,940.80	142,348.76
21	144,608.17	14,460.82	159,068.99
22	161,328.40	16,132.84	177,461.24
23	179,720.66	17,972.07	197,692.72
24	199,952.14	19,995.21	219,947.35
25	222,206.76	22,220.68	244,427.44
26	246,686.85	24,668.69	271,355.54
27	273,614.95	27,361.50	300,976.45
28	303,235.86	30,323.59	333,559.45
29	335,818.87	33,581.89	369,400.75
30	371,660.17	37,166.02	408,826.18
31	411,085.60	41,108.56	452,194.16
32	454,453.57	45,445.36	499,898.93
33	502,158.34	50,215.83	552,374.18
34	554,633.59	55,463.36	610,096.95
35	612,356.36	61,235.64	673,592.00
36	675,851.42	67,585.14	743,436.56
37	745,695.97	74,569.60	820,265.57
38	822,524.98	82,252.50	904,777.48
39	907,036.90	90,703.69	997,740.59
40	1,000,000.00		1,000,000.00

As you can see, investing is a long journey. You have to commit to it. If you started early then well and good, you will be paying less for a huge amount of gains because your investment will enjoy exponential growth if it is held for more than 25 years.

Mr. Invest Early's yearly payment is only P2,259.41 every year. His total payment amounted to P90,376.58 for the whole 40 years duration. On the other hand, the interest income he earned is about P909,623.42.

Analyze that, there needs to have continuity in your investment so that your purpose is achieved i.e. to get P1Mn investment for your retirement. Without continuity, what you started is useless.

To give you a complete picture, see this illustration.

Amount of

Age Investment/Year Total Interest Income Total Payment

20 P2,259.41 P909,623.42 P90,376.58

30 P6,079.25 P817,622.55 P182,377.45

40 P17,459.62 P650,807.50 P349,192.50

50 P62,745.39 P372,546.05 P627,453.95

The table above is very clear, it is easy to interpret. The younger a person is, the cheaper is the cost of investment and the higher is the earning potential.

Note:

Let me expound on Mr. Invest Early's case. Since he is only 20 years old, definitely the amount of P2,259.41 is quite expensive knowing that he has just started as an abled workforce. Consider this, his yearly payment of P2,259.41 will not cost the same after several years of paying, meaning as the years go by, the buying power of P2,259.41 decreases due to inflation.

The amount of premium of insurance is not adjusted to the current buying power of the currency unlike in obligations like loans and mortgages where the amount is repriced to reflect the true value. This is something that people should capitalize on, as what you pay is cheaper in the long run yet you are gaining so much from it due to appreciation of your investment.

Conclusion

If you want to have a P1Mn retirement fund, start investing early. If you want to invest in the stock market, you can choose local brokers like Colfinancial, BPI Trade, BDO Namura, Philstocks, and AB securities.

For global markets, you can use eToro. Attend to eToro orientation by clicking here

On the other hand, if you want to maximize your hard-earned income you can opt to invest in a VUL Life Insurance of Philamlife. You'll have protection against life's risk at the same time, you will have a withdrawable investment for your retirement.

Check out All my Products and Free Services

Book my services as Financial Advisor. Get Free AIA All In One Life Insurance Quotation.

If you think that the contents of this article helped you in any way. I would appreciate it if you can comment and share my blog with your social media pages especially to your friends, family, and colleagues. Thank you.

You can reach me out in the following social media:

Linked-in: Efraim Osingat, CPA, MBA, RFP

FB Page: Financial Literacy Evolution

Website: efprimefinancials.com

Youtube: EfPrime Financials

Disclaimer

The Author is advising readers to consult with your respective Financial Advisors before venturing in any investments. Investing your money is dependent to your goals and your risk tolerance. You should know the risks and rewards of investing before you actually do the same. The illustrations above are for educational purposes only and any risks or losses that you may incur are imputable to your respective decisions.

The author does not in any way provide a guaranty as to the effectiveness and quality of the products and services that are featured in this blog. The products and services were advertised based on personal experience and product and service reviews that the product/service received.

Want to receive more?

Subscribe to my newsletter and I’ll send you the things that we’ll both love. Just put your information and you’ll be all set. And as always, feel free to unsubscribe or adjust the frequency of mailings.

EfPrime Contents | EfPrime Finance

Search This Blog