Passive Income From SSS Flexi Fund How Much You Can Earn – Peso Lab
In another post, we talked about the overview of SSS Flexi fund, why it’s good for overseas Filipino workers (OFWs) and how to get started earning in passive income. But how much can you possibly earn? If you start saving today, in what ways can you make the most out of your savings?
I’m going to try to answer the following. What’s going to happen if you only save the minimum of P200? Is there a difference between saving monthly versus yearly? And what happens if you save only one-time big time?
Flexi fund earnings
According to this source, the guaranteed earnings from SSS Flexi-fund is 4%. There is also another reference, although now unavailable, that stated that the returns for an earlier period was 5.1%. SSS stated earnings can be whichever is higher from their short-term placement or 91-day treasury bills, to which the fund is invested. If we look at BSP rates, this could mean the rates can range between 1.7% to 5.754%.
As an aside, if it is indeed true that the program guarantees 4%, then that is good news. It seems to be the standard yardstick for managed funds in general.That’s relatively higher than savings accounts in the bank, time deposit, and most mutual funds, UITFs, variable universal life, and other risky investments.
For this article and projections that you see here, we’re going to use the 4%.
Secondly, it is also not clear how much AIB is going to be credited. Thus, it is not going to be part in computing the estimates.
Fees of SSS Flexi-fund
Secondly, there’s also a bit of a challenge in taking fees into account . According to the enrollment form, there is a management fee of 1% that SSS use to pay for the management of the investments.
It’s not quite clear whether this represents 1% to be charged to your account every monthly or every year. Because of this, the fees would be neglected in the estimates below. Again, the goal here is to let you understand how your savings accumulate over time.
Secondly, there are no taxes to be concerned about so it’s not going to be part of the calculations that are in the table.
Computation of flexifund
With the estimates that you’d see later in this article, the computation assumes that the savings are in the fund for 20 years. It is also assumed that you are not going to make any final claim or withdrawal. Here are some things to remember when looking at the estimates.
1. Flexi fund minimum savings
For most of us, it might be tricky to set aside money every month. Especially for OFWs who may have multiple dependents, they might be lucky to be able to save at all.
For the first projection, let’s look at the growth of money if you only save ₱200 or ₱500 once and only once.
This might be the case when you are unable to consistently saved and forgot that you’ve set aside cash in the fund.
| YEAR | SAVINGS | TOTAL | SAVINGS | TOTAL |
|---|---|---|---|---|
| 1 | 200 | 208 | 500 | 520 |
| 2 | 216 | 541 | ||
| 3 | 225 | 562 | ||
| 4 | 234 | 585 | ||
| 5 | 243 | 608 | ||
| 10 | 296 | 740 | ||
| 15 | 360 | 900 | ||
| 20 | 438 | 1,096 |
As you can see, at the end of 20 years, your money doubles. From 200 pesos, it becomes 438 pesos and the 500 pesos is going to be worth 1,096 pesos.
2. Saving in Flexi-fund regularly.
Let’s estimate when you are saving regularly. In this case, you are able to save at the very least ₱200 or ₱500 a month. And let’s see how much your money going to be at the end of two decades.
By doing this, total savings at the end of the year is ₱2,400 and ₱6,000 every year respectively. It may not be much right now, but the magic happens when the saving is done consistently.
This is actually how most savings work. It’s easier to commit to save a little bit each month. The fund grows little by little until it gets accumulated to a big amount.
| YEAR | 200/MO | TOTAL | 500/MO | TOTAL |
|---|---|---|---|---|
| 1 | 2,400 | 2,453 | 6,000 | 6,132 |
| 2 | 4,800 | 5,005 | 12,000 | 12,513 |
| 3 | 7,200 | 7,662 | 18,000 | 19,154 |
| 4 | 9,600 | 10,427 | 24,000 | 26,066 |
| 5 | 12,000 | 13,304 | 30,000 | 33,260 |
| 10 | 24,000 | 29,548 | 60,000 | 73,870 |
| 15 | 36,000 | 49,382 | 90,000 | 123,455 |
| 20 | 48,000 | 73,599 | 120,000 | 183,999 |
At the end of 20 years, you can see that you’re able to save 48,000 pesos for ₱200 monthly savings and ₱120,000 pesos for ₱500 monthly savings.
And since you’ve put your savings in Flexi-fund, the accumulated fund has grown more than 50%: ₱73,599 and ₱183,999 respectively.
3. Flexifund: saving every six months
Let’s imagine that you can only save every six months. It can be a strategy when you’re able to get extra cash from bonuses that are credited semi-annually.
For this projection, we assume that you’re able to save 1,200 or 3,000. And now let’s see how the money grows over time.
| YEAR | SAVINGS | TOTAL | SAVINGS | TOTAL |
|---|---|---|---|---|
| 1 | 2,400 | 2,472 | 6,000 | 6,181 |
| 2 | 4,800 | 5,045 | 12,000 | 12,612 |
| 3 | 7,200 | 7,721 | 18,000 | 19,303 |
| 4 | 9,600 | 10,506 | 24,000 | 26,264 |
| 5 | 12,000 | 13,402 | 30,000 | 33,506 |
| 10 | 24,000 | 29,740 | 60,000 | 74,350 |
| 15 | 36,000 | 49,655 | 90,000 | 124,138 |
| 20 | 48,000 | 73,932 | 120,000 | 184,830 |
As you can see from above example, that although technically you’re able to save the same amount, different strategies would net different accumulated earnings at the end of 20 years.
For instance, saving 1,200 every six months gives you 73,932 and 3,000 semi-annually with 184,830. The difference is minimal.
3. Saving Flexi fund yearly
But what if you can only save once a year?
Again, you might be like most Filipinos. You get a windfall at the end of year because of incentives, bonuses, gifts, and other perks. And it’s only the time of the year that you can really put something to your savings program.
That’s not actually bad at all. Save only at a pace that you’re comfortable with. If we take this into account, yearly savings can still give you returns.
In this estimates below, it is assumed that you’re able to save at least 2,400 per year or 6,000 per year.
| YEAR | 2.4K/YR | TOTAL | 6K/YR | TOTAL |
|---|---|---|---|---|
| 1 | 2,400 | 2,496 | 6,000 | 6,240 |
| 2 | 4,800 | 5,092 | 12,000 | 12,730 |
| 3 | 7,200 | 7,792 | 18,000 | 19,479 |
| 4 | 9,600 | 10,599 | 24,000 | 26,498 |
| 5 | 12,000 | 13,519 | 30,000 | 33,798 |
| 10 | 24,000 | 29,967 | 60,000 | 74,918 |
| 15 | 36,000 | 49,979 | 90,000 | 124,947 |
| 20 | 48,000 | 74,326 | 120,000 | 185,815 |
Again, at the conclusion of two decades, you’re about 48,000 pesos and 120,000 in savings. With earnings from the SSS Flexi fund, you can see that your money has grown to 74,326 pesos and 185,815 pesos respectively.
5. Saving one-time big time with Flexi fund
Now let’s say that you can put up a big capital from the get-go.
This can be possible when you’re preparing for something big to purchase down the road. The savings can be a gift to your child once they finish school or something that you allot for retirement, vacation, or acquisition of an investment.
Let’s assume that you set aside ₱48,000 or ₱120,000. Then you let it accumulate compound interest over the years. How much is your money going to be at the end of two decades?
| YEAR | SAVINGS | TOTAL | SAVINGS | TOTAL |
|---|---|---|---|---|
| 1 | 48,000 | 49,920 | 120,000 | 124,800 |
| 2 | 51,917 | 129,792 | ||
| 3 | 53,993 | 134,984 | ||
| 4 | 56,153 | 140,383 | ||
| 5 | 58,399 | 145,998 | ||
| 10 | 71,052 | 177,629 | ||
| 15 | 86,445 | 216,113 | ||
| 20 | 105,174 | 262,935 |
As you can see from the table, your savings more than double at the end of 20 years. The 48,000 savings from the start becomes 105,174 and 120,000 becomes 262,935.
Conclusions
You might conclude that saving one-time big time is the most ideal as it offers the highest returns. According to the math, that is actually true.
However, it shouldn’t stop you from saving at a pace that you’re okay with. There is no use in waiting for the perfect time to participate in SSS Flexi-fund when you can actually start with the little that you have.
The important take-away from this article is that whichever you go about it, you can earn passive income from the program. And that is regardless of the amount and regardless if you save one-time, monthly, or yearly.
