Tuesday, April 10, 2007

Early Retirement - How to Afford it?

Whilst the 'Cost of Living' in the Philippines, is considerably less than civilised Western Countries, you still do need some form of income to live off, and which beats inflation.

There has been much discussion on the Cost of Living on various Yahoo Groups and Forums that provide information on Living In The Philippines, and that of Cebu in particular.

It really comes down to what 'Life Style' you live I guess.

It also depends if you are married, or hoping to find someone to marry. Those married can buy land in their wife's name as a Foreigner cant own land in the Philippines. You can Lease Land for up to 50 Years however. You can also own the house built on Leased land or land owned by your wife.

Cost of building a house is very reasonable in the Philippines, due to relatively low cost of labour. I had a 105 sq m floor area, 3 storey 'extension' built a couple of years ago for Php1.3M.

(In the UK, my sister spent more than that, on just a 'Conservatory' and kitchen make over).

Many just Rent a place to live in - some furnished, others buy their own furnishings. Rents in Cebu vary according to location, and size. Perhaps from as low as Php4,000 for non-furnished, away from Cebu City, to Php15,000 a month, or even as high as Php50,000, for large properties near the beach, with swimming pool perhaps?

4 BR, 2TB, located in Pacific Grand Villas subdivision, Mactan. Furnished at Php30K/mo.

Coral Point Condo: CE unit - 2 BR, 2TB, beach front, very quiet, furnished at Php50K/ mo.

Ignoring the cost of accommodation, a couple can live reasonably well from Php20,000 a month (or less) in Cebu, to Php50,000 (or more), depending on how much you like to eat/drink out , travel, socialise etc.

Many Filipinos (over 40%, 34 Million+ according to World Bank 2004 figures), live off less than US$2 a day.

Fortunately, I had some 'Private Pensions' in the UK, and under current UK law, one could convert these into an Annuity from Age 50. You can also elect to take up to 25% as a Tax Free Cash Lump Sum, which is what I did.

The 75% balance, of my Private Pensions, converted to an Annuity, pays me almost £300 a month. This is no where near enough to consider retirement on in the UK, or Europe.

Converted to Peso, however, is currently about Php28K a month.

The 25% cash, was converted to Peso, when it was about Php107 = £1.

This 'capital' was placed into a 5 Year 'Term' Deposit with HSBC. At that time, about 3 years ago, the Interest Rate on such a Deposit was 8.3%pa, with Interest paid Tax Free (no 20% Withholding Tax deductions on savings with maturity of at least 5 years) monthly, into my ATM account.

The other good thing about this 'Term Deposit' is that HSBC allow you to borrow money (up to 85% on Deposit currently , was 90%) via AssetLink, where the Interest on such loan, is never higher than the Deposit Rate +1%. I took advantage of this AssetLink Loan to pay for building my house.

My 'Ex' got to keep our house in the UK, from our Divorce. I had my Pension, some of the 'With Profit' Endowment type policies, an Apartment in Cyprus (subsequently forced to sell to pay Solicitor Fees, and Credit Card bills), and my Triumph Trident T160 motorbike.

After my 'retainer' income stopped in 2002, and was forced to sell my Triumph Trident T160 to help pay my son's University education, - how I miss that bike.

I do have another motorcycle, but it's a bit of a let down from the 750cc 3 cylinder Triumph.

It's a Chinese motorbike -
'Lonsin' T200 'Terminator'
200cc, Single cylinder, 'Cruiser' style, motorbike.

Bought this off a friend for just Php40K.

I sold up my 'With Profits' Endowment type Policies - I needed the money to live off, more than the 'Life' cover, in case I die?

NEXT: How to "Double Your Money in 5 Years?"

1 comment:

boostah said...

cool blog you seem to have sorted it somehow, i did somthing similar but living in the city i might go back to province someday but im still little young, late 20s so gonna try immigrating to canada for a bit first its ok living here but i do miss some things though im not sure exactly what they are