How to Keep Growing Your Money Even In Retirement

Just because you’ve retired, it doesn’t mean your money should stop working. In fact, now’s the time to make sure your nest egg not only lasts but continues to grow. Let’s explore how you can keep your finances as active as your new lifestyle with some strategies for investing for retirees.

Why keep investing in retirement?

Remember when you thought retirement meant sitting on a rocking chair all day? Well, today’s retirees are running marathons, starting businesses, and traveling the world. Your money needs to keep up with your lifestyle and, let’s face it, with inflation too.

Consider this: If you have PHP 5,000,000 in savings at age 60, and inflation averages 3% per year, you’d need about PHP 6,715,000 by age 70 just to maintain the same purchasing power. That’s why smart investing after retirement should be a crucial part of your strategy.

Investment ideas for retirees

Your investing strategy in retirement should focus on balancing income generation, capital preservation, and modest growth. Here’s a guide to help you align your hard-earned savings with your retirement goals:

Short-term: Keeping cash flowing for immediate needs

These are funds you’ll need access to soon for day-to-day expenses, emergency funds, or that vacation you’ve been planning.

Sample investment options:

1. Certificates of deposit (Time deposits): Think of these as the loyal friends of the banking world. You agree to leave your money with the bank for a fixed period, and in return, they pay you a higher interest rate than a regular savings account. It’s like putting your money in a cozy, secure cabin for a while, knowing it’ll come out a bit plumper. Risk appetite: Conservative.
2. Money market funds: These funds work hard behind the scenes, investing in short-term, high-quality securities to give you better returns than a typical savings account, while still keeping your money accessible. The Metro Money Market Fund does not have a minimum holding period. You can redeem as early as the next banking day, without any additional cost. Perfect for that rainy day fund or upcoming travel plans. Risk appetite: Conservative to Aggressive.

Sample scenario:

Gloria, 68, wants to ensure she has easy access to cash for her living expenses and an upcoming family reunion. She puts PHP 500,000 in a 1-year time deposit earning 4.5%* per annum. After a year, she’ll have PHP 522,500—enough to cover her needs and treat her grandkids to some extra ice cream!

(Note that interest rate of 4.5% per annum may vary based on the selected term and investment amount. Subject to 20% withholding tax.)

Medium-term: Balancing growth and income (3-7 years)

These investments are for goals further down the road, like a major home repair, helping with a grandchild’s education, or funding your hobby-turned-small-business.

Sample options for investments for retirees:

1. Conservative balanced funds: These funds balance a mix of bonds (for stability) and a smaller portion of stocks (for growth potential). They aim to give you a steady ride while still reaching a bit higher, perfect for retirees who want their money to grow but aren’t comfortable with too much risk. Risk appetite: Moderate.
2. Retirement income funds: These funds are specifically designed to provide a steady stream of income in retirement while still maintaining some growth potential. If you’re interested in starting a unit income paying fund, you may consider the Metro Unit Paying Fund, which is designed to distribute dividend income payouts every three months and to grow your principal overtime. It’s like having a personal chef who ensures you always have nutritious meals (regular income) while occasionally surprising you with a delicious treat (potential capital appreciation). Risk appetite: Moderate.

Sample scenario:

Ricardo and Elena, both 72, want to help fund their granddaughter’s college education in 5 years. They invest PHP 1,000,000 in a conservative balanced fund. Assuming an average annual return of 5% and that they reinvest annual returns, they could have about PHP 1,276,000 by the time their granddaughter is ready for university—a significant contribution to her future!

(Note that the percentage of the average annual return is a hypothetical example for illustrative purposes only. Real market returns fluctuate and actual returns may vary significantly and are not guaranteed.)

Long-term: Preserving your legacy (7+ years)

These are investments aimed at long-term growth and wealth preservation, perhaps to leave a legacy for your children or grandchildren, or to ensure you’re financially comfortable in your later retirement years.

Sample investment options:

1. Annuities: Think of annuities as a personal pension plan you can buy. You make a lump-sum payment or a series of payments to an insurance company, and in return, they promise to pay you a regular income for a specified period or even for life. Risk appetite: Conservative to Moderate.
2. Dividend-focused equity funds: These funds invest in stocks of companies known for regularly sharing their profits with shareholders through dividends. While the value of the stock may fluctuate, you can enjoy the dividends regardless. It’s a way to potentially grow your wealth while also generating regular income. Risk appetite: Moderate to Aggressive.

Sample scenario:

Miguel, 65, wants to ensure he has a steady income stream to supplement his pension and leave something for his kids. He invests PHP 2,000,000 in dividend-focused equity funds. Assuming a 4% annual dividend yield, this investment could provide him with an additional income of PHP 80,000 per year, or about PHP 6,667 per month. This strategy not only offers Miguel a regular income stream but also maintains the potential for capital appreciation over time, which could benefit both him and his children in the long run.

(Note that the percentage of the average annual return is a hypothetical example for illustrative purposes only. Real market returns fluctuate and actual returns may vary significantly and are not guaranteed.)

Fine-tuning your retirement investment strategy

Retirement doesn’t mean your financial journey is over—it’s just entering a new phase. Your investment strategy should reflect your current needs for income and stability while still incorporating some growth elements to ensure your savings last as long as you do (and maybe even longer!). Remember:

1. Reassess regularly: Your needs and goals may change as you progress through retirement. Review your investment strategy annually or when significant life events occur.
2. Stay diversified: Don’t put all your eggs in one basket. A mix of investment types can help manage risk and provide more stable returns.
3. Consider inflation: Ensure your investment returns are outpacing inflation to maintain your purchasing power over time.
4. Be tax-smart: Understand the tax implications of your investments and consider tax-efficient strategies to maximize your after-tax returns.
5. Plan for healthcare costs: As healthcare needs often increase with age, ensure your investment strategy accounts for potential medical expenses.
6. Seek professional advice: Consider working with a financial advisor who specializes in retirement planning to optimize your investment strategy for your unique situation. Check out Metrobank’s wide array of investment options with professionally managed funds and access to global markets. You can also go to FirstMetroSec to access investment options including stocks, bonds, REITs, and pooled funds.

With the right investment strategy, you can ensure your finances support your retirement lifestyle, allowing you to focus on what truly matters—enjoying this well-deserved chapter of your life! Explore more guides about investing, credit management, and insurance at lifebanking.ph.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research and consider consulting with an investment professional before making investment decisions