Pera, pera ‘lang’ 

How perfect is the planet Earth?

First of all, Earth is not perfect. But it is extraordinarily, improbably well-suited for human life, sitting on a razor-thin edge between chaos and sterility.

Earth is just the right distance from the sun. If Earth were too close, the oceans would boil; too far, and the oceans would freeze. That liquid water is essential for human biology.

Earth’s finely balanced atmosphere of 78 percent nitrogen, 21 percent oxygen and a trace of CO2 (carbon dioxide) stabilizes oxygen. It is perfect for high-energy human metabolism and enables plant life and climate regulation.

Earth’s gravity is strong but not crushing. The planet has a magnetic field, an invisible shield that protects DNA from lethal cosmic rays. The giant moon prevents the climate from chaotic swings between extremes. Earth’s moving tectonic plates recycle carbon (i.e. a climate thermostat), create continents and nutrients and prevent runaway greenhouse or icehouse states.

Finally, the gas giant Jupiter acts as a gravitational shield, deflecting many asteroids that would otherwise impact Earth.

Earth is not designed for humans. Humans evolved to fit Earth. Humans made a conscious effort to survive after their existence.

Now, what are the chances of you being born?

For you to be born, every single generation before you required the right people meeting at the right time, producing the right child who survived long enough to reproduce. If just one link were missing, you would not exist.

Physicists and philosophers tried to estimate the chances of a person being born. A commonly cited conservative estimate for you existing “exactly as you are” is in the order of one in 102685000. To put this into perspective, winning a lottery is about 1 in 108. The chance of being struck by lightning this year is approximately one in 106. Being you is incomprehensibly smaller.

From a purely probabilistic standpoint, being you is almost impossible. From reality’s standpoint, you are inevitable because you happened. Therefore, while your existence is unlikely, it is also meaningful because it beat the impossible odds.

Put another way, chance played a role in your existence. But you exist because generations of people made decisions that kept this path alive. Small early decisions constrain all future possibilities. And once a path is taken, randomness shrinks.

Now, let us look at retirement.

The World Health Organization estimated that in 2023, there were 9.9 million Filipinos who were aged 60 and above, roughly 8.6 percent of the country’s total population. By 2050, the number of retirees will more than double to 21.7 million, or 16.2 percent of the population. And while today, a good chunk of the population is in the young and working demographic with ages of 15 to 40, by 2050, the bulk will come from those in the range of 35 to 70 years old, as population growth slows. There will be fewer young people and shorter lifespans supporting public pensions amid an enlarged retirement population.

What is more telling is that in 2021 average Filipino life expectancy at birth shortened to 66.4 years, while health life expectancy at birth (HALE) deteriorated to 58.8 years. HALE is the average number of years a person is expected to live in full health.

Given those stats, are Filipinos generally prepared for retirement? By most accounts, no.

Studies indicate that many retirees work part-time or continue earning to supplement their income after retirement. Lump-sum retirement benefits as mandated by law, combined with Social Security System/Government Service Insurance System pensions and supported by PhilHealth benefits, help.

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But it is best to supplement retirement with a self-established retirement fund so that work in retirement becomes optional.

Enter the Personal Equity Retirement Account (Pera) Law. Under Pera, a person can contribute up to P200,000 a year toward his retirement and get:

• 5 percent tax credit that he can offset against his next year’s income tax;
• tax exemption on investment income; and,
• tax exemption when he gets his money at the age of 55, provided he has made five nonconsecutive years of contributions.

Plus, all funds under Pera are exempt from estate tax.

Pera accounts can only be opened with accredited Pera administrators, the complete list of which can be found at bsp.gov.ph/Pages/InclusiveFinance/PERA_Participants.aspx.

Just like with the survival of humans on planet Earth and your particular existence, having a long and healthy retirement will start with randomness.

But the small conscious efforts you apply now will make that randomness shrink. And setting up your own retirement fund is part of this conscious effort.

Send questions via “Ask a Friend, Ask Efren” free service at personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook.

Efren Ll. Cruz is a registered financial planner and director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach.