Categories
Investing Money Mindset Passive Income Personal Finance Stocks

Where to Invest in 2010 Part 3- Investment with Tax Incentives: PERA vs CTRP

This is part 3 of the “Where to Invest in 2010” series which tries to compare the two investment vehicles with tax incentives: PERA and CTRP.  Part 1 dealt with the Filipino investor profile while part 2 discussed the 5 stages of Life Cycle Investing.

In your journey to financial freedom, one inevitable expense that you would have to deal with is taxes.  It is not enough that you make a lot of money.  It also matters how much you keep. 

Who is richer? A person who makes $100,000 a year and pay $50,000 in taxes?  Or someone who earns only $70,000 and only pays $5,000 in taxes?  The answer is simple.  The one who keeps the more money (after taxes).

Investment w/ Tax Incentives: PERA vs CTRP

According to Efren Cruz, the author of the book “Pwede Na! The Complete Pinoy Guide to Personal Finance”, there are two investment vehicles that offer tax incentives.  There is PERA (Philippine Equity Retirement Account) and CTRP (Comprehensive Tax Reform Package). 

Here are the main differences between PERA and CTRP:

Criteria

PERA

CTRP

Contribution
  > Non-OFW
  > OFW
<= PhP 100,000
<= PhP 200,000
no limit
no limit
Max # of accounts 5 none
Tax Benefits on Financial Instruments    
  > Capital Gains
  > Interest Income
exempt
exempt
exempt if tenor > 5 years
exempt if tenor > 5 years
Tax Benefits on Stocks    
  > Capital Gains
  > Interest Income
exempt
exempt
taxable
10%
Tax Credit 5% of contribution none
Administration with none

 

As you can see there is a LOT of tax advantages for both types of accounts.  Having a tax exempt investment is like saving at least 20% of your income.  It’s money that you keep. 

Rich Money Habits Thoughts:

To be honest, I haven’t given much thought about retirement until I learned about the tax incentives from the seminar.  I understand that there’s a mandatory SSS or GSIS in the Philippines.  I also read about 401K and Roth IRA accounts in the US but I am not sure if there’s anything similar to it in the Philippines. 

There’s still a lot more to learn about retirement accounts in the Philippines, but the tax incentives definitely caught my attention. The tax benefits from PERA and CTRP are incredible. 

Unfortunately, for reasons I still don’t understand, PERA is still not available in the Philippines.  I guess I’ll have to wait until it becomes available.  As for CTRP, it was my first time to hear about it during the seminar, so I really don’t have any clue. 

My only hope is that I’d be able to learn and take advantage of both financial vehicles and share it to readers of this blog some day.

 

How about you?  How are you planning for your retirement?  Have you taken advantage of any tax incentives for your investment accounts?

Categories
Investing Money Mindset Passive Income Personal Finance Stocks

Where to Invest in 2010 Series: Part 2 – Life Cycle Investing

This is part 2 of a series of articles discussing the lessons and tips from Moneysense Live’s Where to Invest in 2010 Seminar.

Part 1 of the series introduced the Filipino investor profile and shared the overall financial outlook for 2010 along with some tips on how to invest in the coming year according to one of Citibank’s financial analysts.

This time we will be sharing the 5 Stages of Life Cycle investing which was discussed by a BPI representative during the seminar. 

5 Stages of Life Cycle Investing 

  1. Orientation
    • Eager Beginner (mid 20’s and younger)
    • Learn the different types of savings
    • Cultivate the habit of savings and investing
  2. Exploration
    • Investment Apprentice (mid 20’s to 30’s)
    • Gain knowledge and experience on the different investment options
    • Develop skills to choose the right type of investments and avoid scams
  3. Accumulation
    • Wealth Builder (30’s to 40’s)
    • Optimize returns
    • Accumulate wealth by owning a home, new car, higher education, etc
  4. Preservation
    • Asset Protector (50’s to 60’s)
    • Seek less risky investments to protect money accumulated
    • Live on interest
  5. Disposition
    • Legacy Bestower (60 and above)
    • Self-sufficient
    • Leave heirs with as much assets as possible

Rich Money Habits Thoughts

The above 5 stages of life-cycle investing allows you to assess your financial situation and where you’re supposed to be at specific points in your life.  It is a handy guide to achieving your dream of financial freedom. It is a financial roadmap.

If you’re still young in your 20’s, it would be to your advantage to start learning how to personally manage your money as soon as possible.  This is very hard to do especially when you’re young.  You would rather enjoy life and spend as much as you can than worry about saving and investing your own money. 

If you’re in your 40’s and still struggling to save, that’s an obvious sign that you urgently need to start catching up fast.  Decide now to learn about the various ways to save and invest your money while you still have some time. 

If you’re looking for ways to build your retirement fund, you’re in luck as part 3 of the series will discuss the available retirement accounts in the Philippines (PERA vs CTRP) as well as the tax incentives from choosing one over the other.  The article will also touch a little bit on REITs.  So watch out for that in the coming weeks.

If you’re already approaching retirement, I wish you well.  I hope your retirement income from your investments can support you to live out your dream of financial freedom!  Have fun and enjoy life!

 

P.S.  Watch out for the announcing of the winner of Rich Dad Poor Dad book by Robert Kiyosaki from our first ever Rich Money Habits Readers’ Survey!

P.P.S. We will also be launching the Rich Money Habits Newsletter this month which includes a special section showcasing the results from the first ever Rich Money Habits Reader’s Survey.