2 Ways To Get The Highest SSS Pension
The COVID pandemic made us realize the importance of preparedness in health, finances, and job security. The SSS pension, for example, is one of the most sought-after retirement packages for Filipinos. Many rely heavily on their SSS pension, which is why it is a common topic for discussion between peers. Thus, it makes sense to ask, “How to maximize the SSS pension?”
By now, you already know how to compute the SSS pension. If you don’t, click the link below or watch the video.
READ: SSS Retirement Benefit: An Easy-to-Follow Guide in Computing Your Pension
What are the assumptions?
The computations below are for those who started working at 20 and retired at 60.
Another thing is that we used the SSS schedule of contributions for 2022, which is at 13% of the MSC. The final contribution rate will be 15% in 2025.
Fret not. Even if you started at an older age, the comparisons are still valid. It’s just that the digits will differ, but the general idea will remain logical.
2 Ways to Maximize the SSS Pension
There are two suggestions we often hear from our friends or relatives.
First, you only need ten (10) years of contributions. Second, you pay the minimum and then jack it up five years before retirement.
They seem like superb suggestions. But if we put them to the test, would they still be good suggestions?
Let’s find out.
1. Complete the 120 contributions
For new SSS members, one way of getting Credited Years of Service (CYS) is by dividing the number of contributions by 12. So it means 120 contributions are equal to 10 CYS.
You must have made at least 120 contributions to qualify for the pension. Hence, others recommend stopping paying after ten (10) years.
We have created an Excel sheet to see how much pension you’ll get with only 120 contributions for the MSCs available.
So here it is.
The least amount you can get is Php 2,200, comprising the Php1,000 given to all pensioners, while the maximum amount is Php 9,000.
Aside from the monthly pension, we have included the cumulative SSS pension. You can use this to compare it with the total contribution paid.
You will notice that breakeven happens within five (5) years of getting the SSS monthly pension.
So, do we think it can help you maximize your pension?
The answer is no.
Again, 120 contributions are the minimum requirement to qualify for the pension. Hence, you will also get the minimum for that bracket.
2. Pay the maximum contribution 5 years before retirement
Many are clamoring for this suggestion. Maybe it is because the computations are already available for our consumption. They already tested it, just like what we are doing now.
Unlike the first recommendation, you will pay the minimum contributions until you turn 56 and the maximum for the last five (5) years.
For this example, we will show two (2) tables.
The first is for someone who paid the same salary bracket for 40 years. Then the other one is for someone who stayed for 35 years in the same salary bracket and contributed the maximum MSC in the last five (5) years.
Both of them have 40 CYS.
The maximum pension you will get is PHP 17,300 for 40 CYS.
You will receive this amount regardless of whether you pay the maximum for 40 years or just the last five (5) years with 40 CYS.
If you do the latter, you will save a lot of money. That’s a difference of PHP 928,200 that you can redirect to other investing activities.
Hence, it is the way to get the maximum SSS pension for less money.
Final Thoughts:
The SSS pension is like a fortress we lean on in our golden years. It is something we can rely on when we can no longer work.
Retirement can be a dream or a nightmare, depending on our financial decisions while still working.
You can indeed get the maximum pension while contributing a smaller amount. It might even appear like a loophole to some.
However, you can avail yourself of seven (7) SSS benefits, and pension is only one of them. When you take this route, it’s like letting go of the other benefits.
You get the maximum pension but a minimum on the other six (6) benefits.
You may get to maximize the SSS pension, but your dependents may only get the minimum out of it. It is something you have to balance.
But if, in the end, you follow this, make sure to protect your dependents. Make good use of the amount you saved by doing it.
Get life insurance to safeguard your family. Get health insurance to get the treatment you need without using your savings. Lastly, don’t forget to invest the remaining amount for a brighter future (retirement).
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Ton is an electronics engineer, financial blogger, insurance agent, and a certified investment solicitor. A multi-awarded financial advisor with clients ranging from lawyers, doctors, engineers, accountants, business owners, company directors, and OFWs to minimum wage earners had sought advice from him in achieving lifetime financial freedom.
