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, that’s 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 for the SSS pension. If you don’t, you may read our blog about it by clicking the link below or by watching the video.
What are the assumptions?
The computations below are for those who started working at 20 and retired at 60.
Another thing, we used the 2022 SSS schedule of contribution, which is at 13% of MSC. The final contribution rate will be at 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 pay the contributions for ten (10) years. Second, you pay the minimum and then jack it up to the maximum amount five years before retirement.
It seems to be a superb suggestion. But if we put it to the test, would it still be a good suggestion?
Let’s find out.
1. Complete the 120 contributions
For new SSS members, one way of getting the Credited Years of Service (CYS) is by dividing the number of contributions by 12. So it means 120 contributions are equal to 10 CYS.
To avail of an SSS pension, you must have paid at least 120 contributions. 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 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.
2. Pay the maximum contribution 5 years before retirement
It is the most recent suggestion we heard. Maybe because the computations are already available for most of us, they have probably done the thing we are doing now. We are putting it to the test.
Unlike the first recommendation, you will pay the minimum contributions until before you turn 56 and then the maximum for the remaining five (5) years.
For this example, we will be showing two (2) tables.
The first is someone who stayed in the same salary bracket for 40 years. Then the other one is someone who stayed for 35 years in the same salary bracket with a maximum MSC in the last five (5) years. Both are with 40 CYS.
The maximum pension you will get is Php17,300 with 40 CYS.
You will receive this amount regardless of whether you pay the maximum amount for 40 years or the minimum amount for 35 years, then contribute the maximum contribution for the last five (5) years.
If you do the latter, you will save a lot of money. That’s a difference of Php 928,200, an amount you can redirect to other investing activities.
Hence, it is the way to go if you want to get the maximum SSS pension for the least amount of contribution.
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.
Our retirement can be a dream or nightmare that depends 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 for some.
However, you can avail 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.
It is a difficult personal decision, and if you are married, it’s even burdensome. Yes, you 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 from 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).
Federico 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.