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As per Republic Act No. 7641, Employers are required to pay retirement benefits to their employees,  in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those listed under the exemptions.

"... an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves."

Given this, Employers should plan on how to establish and fund the retirement plan to enjoy the following benefits:

• Company can enjoy tax-free investments of the retirement fund.
• Employer will have no issues on cash flow even if there are big cash outlay when an employee retires.
• Benefits to be received by Employee (in excess of the minimum required by law) will not be taxable.

Retirement Plan: 401(K) 2012

One option on how Employer pays for their Employees' retirement benefits is to pay as Employees retire. This option may hurt the business cash flow. Another option is for Employer to set up a retirement fund to cover for future Employees' retirement benefits.

There are a lot of ways on setting up the retirement fund and one way is through insurance. Personally, I think this is the cheapest and better option. Employer may insure the life of its employees, pay the premium, and use the insurance plan’s cash proceeds to pay the retirement benefits mandated under RA 7641. To learn more on how to set up your company retirement plan through this method, contact me for more details.

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Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides:

Retirement Plan. Credits: s_falkow

"Article 287. Retirement. – Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements; Provided, however, That an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code."

In a quick summary, if you, as an employee (in the Philippines),
- has served the organization for at least 5 years
- is between 60 to 65 years old

Then you may avail of your retirement benefit, which is 
- equivalent to at least 1/2 month salary for every year of service
- a fraction of at least six (6) months being considered as one whole year

The law is intended to protect the welfare of the workers and employees.

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Sharing another beautiful film by Sun Life.

In less than 9 minutes, "A Life in a Day" captures the cycle of life - from childhood to old age. It also captures the precious moments of life through the eyes of a young boy.

Even though the film is short, the story hits directly to the heart. And in less than 9 minutes, it made me reminisce on my childhood days, my school days, my wedding day, the day I gave birth to my son and on trying to be the best mom and wife in the world.  It also made me think back how my parents had worked so hard to care for us and how I am now working hard and caring for my own family's financial security.

The short video is greatly executed through shadow play. It is simple; yet so sweet and so touching that I have to have some tissue papers beside me.

Thank you, Sun Life, for sharing such a meaningful video. It definitely made me reflect on life and especially on the future of my family.

After viewing this film, did you have a flashback and reflect like I did?

Life is short. Enjoy life. Say "I love you" to your loved ones. And don't forget to plan for yours and your family's financial security as we do not know what the future will be.

And if you haven't seen it yet, check out "1945", Sun Life's 1st SunShorts film. Don't forget to have tissue papers around as well because you'll need them when you watch this great real life story film. :)

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One day, I came to a realization that there are only 3 secrets to building passive income:

1. Time: Save as early as you can
2. Money: Save as much and as regular as you can
3. Interest rate: Find better than inflation interest rate

The main reason that we want to start saving early is because of compound interest. Assuming that we use the same interest rate, if you save a thousand pesos a month for ten years between the ages of twenty and thirty, you would actually end up with more savings than if you saved a thousand pesos a month between the ages of thirty and sixty. Compound interest makes a huge impact and the longer your money earns interest the more you will have.

There are a lot of products that help build passive income. One particular product that I like is Sun Life's Sun MaxiLink Prime. I like this product because it maximizes my money and answers my fears:

1. In case of dying too young
   A portion of my premium is placed in insurance so that there's a guaranteed death benefit that will protect the financial security of my family.
   
2. In case of living too long
   A portion of my premium is invested in stock and/or bond markets, similar to mutual funds, to make the cash value grow and, hopefully, to fight inflation over time.

Sun Life product description for its VUL product:

Sun MaxiLink Prime is a peso denominated variable life insurance plan (VUL) that provides financial protection PLUS a potential source of savings that can fund future needs like retirement income through its investment earnings. There are 5 funds to choose from where your premium payments will be invested in. These funds are managed actively and prudently by our top-notch investment professionals.

Sun MaxiLink Prime is payable for at least 10 years*

* The premium paying period is not guaranteed. You may be required to pay additional premiums after 10 years if the fund value is insufficient to pay charges. (cases like consecutive years of bad economic situation, delayed payments and skipped payments)

Reference: Sun Life Financial Philippine Website

A sample computation below using Sun Life's products to illustrate the saving period vs age started:

• A 40 y/o saving 50,000 annually for 20 yrs will accumulate 3.1M at age 60.
• A 30 y/o saving 50,000 annually for 10 yrs will accumulate 5.1M at age 60.
• A 25 y/o saving 50,000 annually for 10 yrs will accumulate 8.4M at age 60.
  

*40 y/o based on Sun Life Prosperity Fund (10% growth); 30 y/o & 25 y/o based on Sun Maxi Link Prime, min. FA + TDB, fund growth at 10%

Start building your passive income to reap the benefits of saving early for retirement. No one else benefits from this except you.

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Sometimes, I had the chance to do a financial wellness presentation to companies. Before the presentation, we would have a simple workshop and in most cases, the participants would share their own financial knowledge and experience on how to set aside funds for their future as well as list their issues on not being able to save.

Savings. Credits: UNHHealth Health Services, University of New Hampshire

The most common statement that came out from the workshop is that no matter how hard one tries, it is hard to save money because of the cost of living, recurring payables and/or immediate needs/wants.

To help answer the issue on not being able to save, some basic laws from Beth Kobliner's "Personal Finance in Your Twenties and Thirties" can help prioritize the checklist on the financial plan.

1. Get health insurance – A single medical problem could bankrupt you. Therefore, health insurance must become your highest priority. If your employer doesn’t offer it, get one for yourself. This is the first step in financial planning.
2. Reduce your debt – The best way to start saving is to reduce your high-interest debt. Or better, write off your debt. The interest rates on some loans / credit cards are higher than the return you’d receive from investing the money.
3. Start saving for retirement – The best time to start saving is when you’re young. Interest rates will really start working for you as you get older and accumulate principal.
4. Reduce your banking costs – Most Saving accounts, Checking accounts, etc have maintaining balances. If you are not careful and go below the minimum balance, fees can take a big bite out of your bank balance.
5. Build up a nest egg for emergencies – What would you do if you were suddenly laid off? Save enough to cover your living expenses for at least six months. Some banks have facility to automatically shift funds from your checking account into a savings or mutual fund account.
6. Become an investor – Join a mutual fund pool to reduce your risk. Invest in mutual funds, which reduce your risk and keep you even with inflation.
   
7. Reduce your taxes – Look for ways to lower your annual taxes. Sometimes there are discounts if you pay your taxes early.

Start paying attention to your finances today. Apply the 7 rules and develop the habits that will help you for the rest of your financial life.

Success happens here. Credits: lee.fly

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"1945" is an amazing short documentary by Sun Life of Canada (Philippines), Inc.

I was touched with the short film's ending message. "In 1945, Sun Life personnel traced and searched for the beneficiaries of those who perished in the war. A time of chaos became a time of honoring commitments and making lives brighter under the Sun."

This is truly customer satisfaction and relationship service!

From past to present, life insurance has only one objective -- that is, to provide protection to the family left behind or protection to oneself especially in times of need.

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Google has provided us a lot of powerful online tools and one of these tools help us "compare search volume patterns across specific regions, categories, time frames and properties."

Today, I wanted to understand what are the most common search keywords done in the Philippines in the last 12 months and with just a few clicks on Google Insight; I am able to generate the web search interest by region and keywords.

Guess which one is the winner? "Credit Card" comes up as number one, and interestingly, investment is at the bottom 4.

Google Insight Web Search Interest. Credits: Google

I did the same search terms but filtered by countries to see how each countries folks do their searches for these 4 keywords.

United States and UK has the same ranking as the Philippines.





China, on the other hand, has "investment" as their number one keyword search.

Add caption

Hong Kong and Japan have "investment" as the top keyword search.





Observation & Interpretation:
Base on the above trends, Filipinos are more interested in credit cards and loans. We have the same behavior and mindset with those of US and UK. This could be because we are highly influenced by Western behavior and the use of credit card enables instant gratification especially in keeping up with the lifestyle trends.

Although many knew about the benefits of investment and savings, it still shows that we are still lagging behind our Asian neighbors in terms of investment research and knowledge acquisition.

Now, what's your observation & interpretation?

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Maslow's Pyramid of Needs. Credits: Wkipedia

 
Maslow's hierarchy of needs interprets human's basic needs as the foundation of the pyramid and gradually elevates to the levels that human motivations generally move through -- safety, love/belonging, esteem and self actualization.

"For the most part, physiological needs are obvious – they are the literal requirements for human survival. If these requirements are not met, the human body simply cannot continue to function."



In the same way, Financial Planning also has a Financial Pyramid. It is a strategic approach in managing investment portfolio where the base of the pyramid is made up of low-risk investments, the mid-portion is composed of growth investments and the top is speculative investments.

For the most part, the base of the pyramid forms the requirements and foundation of a solid financial plan as well as for a long term financial freedom goal. Similar to meeting the physiological needs, if the basic financial requirements are not met, the plan for financial freedom simply cannot continue be achieved.


The 4 levels of Financial Pyramid:

1. Protection
   This stage provides you with a cushion in case of unexpected events, such as job loss or health issues. Items you need to have in this stage:
      -- Savings, Emergency Fund (6 months of salary)
      -- Insurance (Life, Health, Critical Illness, etc)
2. Savings
   This stage helps you to start building your wealth and investments. This is the baby steps in creating your passive income sources. Items you need to have in this stage:
      -- Mutual Funds, Bonds
      -- Real Estate / Your Home
3. Wealth Building
   This stage helps your wealth and investments achieve maximum growth and income. This may be your long term passive income sources. Items you need to have in this stage:
      -- Equity, Stocks
      -- Business
4. Speculation
   At this stage, you should have excess funds with zero or low debt, enough retirement and investment fund before investing in a much higher risk portfolio. Some items in speculation would be:
      -- Gold

   Success. One step at a time. Credits: deZengo

   
      -- Art, Collectibles

The financial pyramid enables us to understand the importance of each stage in order for us to visualize our road to financial freedom. It is also important to note that it is ideal to go one step at a time for each level in your financial plan to achieve success.











Understanding financial pyramid: