^ read your blog...and inflation rate of 5% seems to be too high.
A person now in their 30s should have 22M by that time he or she retires at 60....thats seems to be tough.
Inflation at 5% is actually quite conservative. The average for the past five years has been 4.8%. See another post entitled
Inflation Rates in the Philippines and How Inflation Affects You. The average inflation rate on consumer prices in a 10-year span from 1990 to 1999, was 9.94%. In the first five years of that same decade the average inflation rate was 11.46%. We don't know if it will remain at 4.8% or go lower (hopefully), but we'll use a realistic inflation rate for projections.
As for 22M, yes it is tough, but that is exactly what is needed. Imagine it this way. Let's assume you spend P30,000 a month in 2011. In order to maintain your current lifestyle, that means you will be spending P96,753 per month in 2035 (P96,753 is the Future Value of today's P30,000 in 24 years at 5% inflation rate). Since you are retired, and have no more work, you will be consuming your retirement fund at the rate of at least P96,753 per month in 2035 and onward.
If you do not have P22M and are already retired and you want to maintain your current lifestyle, then you must have PASSIVE INCOME that will give you P96,753 a month in 2035.
Just to give you an idea, a P5M condo today could be rented out for P30T per month. Applying inflation rate, you must have properties worth P16.125M in 2035 in order to give you a passive income of P96,753 a month. But since your source of income is purely from rent, occupancy rates can affect your income. You must have additional properties to rely on. You'll end up having around P20M worth of property to guarantee you a cash flow of P96,753 a month.
Another note: P22M in 2035 is worth P6.8M in 2011. If you have P6.8M today and invest it in a fund that earns 5% per year, then you will have P22M by 2035.
If you don't have such a big amount today, what do you do? Start saving up while developing other sources of income as well.
