Keep the units and dates consistent
Separate spending in today's pesos from spending at retirement. Note when each pension starts, whether its actual terms include adjustments and whether debt payments continue. One future fund cannot be counted again as a separate income source unless the model explains the withdrawal.
A fully labeled fictional scenario
- Retirement is 20 years from now; modeled retirement lasts 30 years.
- Today's spending is ₱40,000 per month, including a routine healthcare provision.
- Spending grows at a hypothetical 3% annually before and during retirement.
- Pension is ₱20,000 monthly starting at retirement and stays flat in nominal pesos throughout this model.
- Existing dedicated retirement fund: ₱500,000 today.
At retirement, spending is about ₱72,244 monthly and the initial gap about ₱52,244. First-year annual gap is about ₱626,933. Because spending rises while pension remains flat, later gaps grow faster than simply applying 3% to the first gap.
| Net annual return, both phases | Modeled fund needed at retirement | Existing ₱500k grown over 20 years | Monthly contribution for remaining gap |
|---|---|---|---|
| 0% | ₱34,044,717 | ₱500,000 | ₱139,770 |
| 2% | ₱24,102,402 | ₱742,974 | ₱79,391 |
| 4% | ₱17,664,528 | ₱1,095,562 | ₱45,539 |
Each row uses its stated constant effective annual return throughout accumulation and retirement. Contributions occur at the end of each month for 240 months; equivalent monthly rate = (1 + annual rate)1/12 − 1. Retirement gaps are withdrawn at each year-end for 30 years. Required fund = sum of each annual gap divided by (1 + return)year. The 0% row assumes no growth in either phase.
Rates are assumed net of all investment costs and taxes, not claimed product returns. Contributions stay fixed in nominal pesos. The modeled fund is exhausted at the end of year 30: it includes no bequest, extra healthcare shock, market volatility or spending beyond that horizon. Actual monthly withdrawals, taxes, fees and irregular returns can change the amount.
A large gap is a planning signal
If the modeled contribution is unaffordable, do not replace it with an exciting guaranteed-return promise. Revisit retirement date, desired spending, pension records, income and resources. Model different inflation, return and longevity assumptions, including a poor early sequence of returns. A fixed percentage withdrawal cannot guarantee lifetime income.
Take one practical step
- Confirm pension records and benefit timing.
- Separate accessible spending resources from long-term investments.
- Choose a contribution supported by your cash flow.
- Review the gap and healthcare plan at least when your circumstances change.
Retirement funding worksheet
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External real-life story
Read the Joey story on the original IPON.Club site ↗. This external story is separate from the fictional calculation on this page.
Next steps
Educational information. Examples use explicitly stated assumptions; actual costs, returns, benefits and personal circumstances vary.