The COVID-19 pandemic has highlighted the importance of being prepared for health, finances, and job security. For Filipinos, the SSS pension is a highly sought-after retirement package and a common topic of discussion among peers. It is therefore logical to inquire about ways to maximize one’s SSS pension.2 ways to get the Highest sss pension | Have a Comfortable Retirement.
If you are unfamiliar with how to calculate your SSS pension, you can refer to our blog post or watch our video for guidance.
What are the assumptions?
The calculations provided below pertain to individuals who commenced working at the age of 20 and ceased working at the age of 60. Additionally, we utilized the 2022 Social Security System contribution schedule, which mandates a contribution rate of 13% of Monthly Salary Credit (MSC). However, it is worth noting that the final contribution rate will increase to 15% by the year 2025.
There is no need to worry if you commenced working at a later age, as the comparisons provided are still applicable. Although the specific figures may differ, the overall concept remains logical.
2 Ways to Maximize the SSS Pension
We often receive two recommendations from our acquaintances or family members regarding Social Security contributions. The first one is to pay contributions for just ten years. The second one is to pay the minimum amount initially and then increase it to the maximum five years before retiring.
Although these suggestions may sound excellent, it’s important to assess their validity before implementing them.
Therefore, let’s examine and evaluate the feasibility and effectiveness of these recommendations.
1. Complete the 120 contributions
One method of obtaining the Credited Years of Service (CYS) for new members of the Social Security System (SSS) is by dividing their total number of contributions by 12. This means that 120 contributions are equivalent to 10 CYS.
To qualify for an SSS pension, it is necessary to have made at least 120 contributions. As a result, some people suggest stopping payments after 10 years.
We have developed an Excel spreadsheet that shows the pension amount that can be obtained with only 120 contributions, based on the available MSCs.
The aforementioned is the rephrased passage in English.
The minimum amount you can receive is Php 2,200, which includes the standard Php 1,000 given to all pensioners. The maximum amount is Php 9,000.
In addition to the monthly pension, we have also factored in the cumulative SSS pension. This can be compared with the total contribution paid. After five (5) years of receiving the SSS monthly pension, the breakeven point is reached.
However, it is important to note that the SSS monthly pension will not maximize your pension. This is because the minimum requirement of 120 contributions must be met in order to qualify for the pension, resulting in the minimum amount being paid.
2. Pay the maximum contribution 5 years before retirement
This is the most recent proposal we’ve heard. It’s possible that others have already tried it since most of us have access to the necessary calculations. We are currently testing it out.
Unlike the initial suggestion, you will only have to make minimum contributions until you turn 56, and then you will contribute the maximum amount for the remaining five (5) years.
To illustrate this point, we will provide two (2) tables. The first
table is for an individual who remained in the same salary bracket for 40 years. The second table is for an individual who stayed in the same salary bracket for 35 years, but during the last five (5) years, they had the maximum monthly salary credit (MSC). Both individuals have 40 credited years of service (CYS).
The maximum pension you will get is Php17,300 with 40 CYS.
You will get the same amount of money whether you pay the highest amount for 40 years or the lowest amount for 35 years and then increase your contribution to the maximum for the last five years. However, if you choose the latter option, you can save a significant amount of money – a total of Php 928,200 – which you can then use for other investments. Therefore, choosing this option is the best way to get the highest SSS pension while paying the least amount of contribution.
The SSS pension is a reliable source of support during our retirement years, similar to a fortress that we can lean on. However, the quality of our retirement ultimately depends on our financial decisions while we are still working.
While it may seem like a loophole, it is possible to receive the maximum pension by contributing a smaller amount. However, it’s important to consider that there are seven SSS benefits available, and choosing to focus solely on the pension means forgoing the other six benefits.
This decision can be challenging, particularly if you are married and have dependents. While maximizing your pension may benefit you, it could mean that your dependents receive only the minimum benefit. It’s essential to strike a balance between your own needs and those of your loved ones.
If you do choose to prioritize your pension, it’s important to take steps to protect your dependents. Consider investing the money you save from contributing less to SSS into life insurance and health insurance to safeguard your family’s financial security. Lastly, be sure to invest the remaining amount wisely to ensure a brighter financial future in retirement.