PERA for Retirement: Yay or Nay? + Other Retirement Options for OFWs

Do you have a retirement fund? If yes, then good for you. There’s no such thing as “too early for retirement,” especially when you want to live comfortably when you get older.

READ: 6 Tips to Help You Save for Retirement

Let’s say you still don’t have a retirement fund. That’s okay. It’s not yet too late as long as you start saving up for it now. Opening a specific account, which will serve as your retirement fund is fine. The problem with this is that you don’t get too earn more in terms of interest and at the same time, withdrawing money is tempting.

What is another option? Consider PERA or Personal Equity and Retirement Account.

READ: What You Need to Know about PERA

In a nutshell, PERA is the government’s way of encouraging Filipinos to save money for retirement. To make your money grow, your PERA contribution, which is currently offered by BDO and BPI only, will be invested in various channels like mutual funds, UITF, government securities, shares of stocks, insurance pension products, and other investment products.

The good thing about PERA is that you can only withdraw your contributions, which is tax-exempt, once you reach the age of 55 years old and has contributed for at least five years. 

Think of it as an additional retirement fund that supplements your retirement package from SSS/GSIS or the company you worked for.

The next question is this: should you apply for a PERA account for additional retirement savings option? 

The biggest selling point of PERA is the tax benefits. Compared to the products offered by banks, PERA has the following tax advantages:

  • Income tax credit, wherein you get to enjoy five percent tax credit out of your total contribution. For instance, your total PERA contribution is P100,000. You will only declare P95,000 in in your income tax because you earned P5,000 tax credit.
  • Investment income is tax-free, which means you are exempted from paying capital gains tax, final withholding tax, and regular income tax.
  • Estate tax exemption, which means in case of death, the PERA contribution will be released to the heirs or legal beneficiaries, sans payment of estate tax and going through the lengthy probate process.

Aside from the tax benefits, you can also choose where you want to invest your money. There are many PERA investment products you can choose from depending on your risk profile, so go for a product that allows you to earn more.

Is it good enough for your retirement fund? The answer is yes. The tax incentives alone is a good reason to consider investing your money in PERA account. Just make sure you won’t withdraw the money before you turn 55 so you will get to enjoy tax benefits.

In case you’re still not convinced with PERA, below are some of your Retirement Fund alternatives:

  • Savings Account – The good thing about having a separate account for retirement is that your cash is readily available. Unfortunately, withdrawing money is more tempting, plus you don’t get to earn more from interest every month.
  • Investment Products – This includes mutual funds, time deposit, bonds, or stocks among others. Investment products yield higher return of investment compared to savings. Check out this post to know more about your options and according to what is more suitable to your lifestyle.
  • Real Properties – It’s not enough that you have a house. Real properties are also an acceptable alternative for your retirement fund because you can earn from it by renting it out. This could be costly to buy compared to the other alternatives, but the money you earn from rent could help you a lot as you get older.

What path would you like to take to make your Retirement Fund happen?

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