SSS and You

SSS and You.   Learn why you need to be an SSS member and what the different SSS benefits are. But most importantly, learn why giving the maximum SSS contribution isn't always a good idea.
Last time, I talked about how being an SSS was a requirement for a better financial future. If only for the simple fact that it's a sort of gate to other (better) investments.

But since we're stuck with it, it's best to make the most out of it.

Benefits:

  • Sickness - There are rules, but for most employees, if you've used up your sick leaves (with pay), you are entitled to 90% of your average daily salary credit. Not bad. If you're a freelancer or small business owner, it's not so clear cut as daily earnings probably fluctuate. But from what I understand, you should still get 90% of whatever your average amounts to.
  • Disability - For when something tragic happens; a partial or total loss of one of your five senses or limbs. You could get a monthly pension (at least 1k -2.5k; possibly for life) or a lumpsum. Again, not bad; but clearly not enough to rely on. And the monthly pension can get suspended if you resume employment.  
  • Retirement - The benefit that probably everyone is familiar with. Not much else to say except that it's pathetically small. The only good point is that at 65, whether employed or not, you can start claiming the pension. That makes the miniscule pension more palatable. But obviously, working in our retirement years isn't really our main goal.
  • Maternity - Another very familiar benefit. If you give birth, SSS gives you roughly 60 days worth of salary. It seems like a great benefit but it comes with caveats. For one, there's a max (around 30k; or 39k for caesarian delivery). Hopefully the employer will make up the difference. Another caveat: you need to have paid at least 3 months contribution within the last 12 months to qualify for this. And yet another big caveat: For some reason, you need to be with your current company for at least 6 months to get maternity benefits. I got this info directly from our HR head; it's supposedly a law. I've not gotten around to researching this rather cold-blooded and depressing law (so let me know if it isn't true; or if it is and you know more about it, please let me know too).
  • Death and Funeral - Basically, if you pass away, your dependents get your pension. It's usually received as a monthly pension. But if you've been a member for less than three years, your dependents get a lumpsum instead. (Just to clarify, the pension we're talking about here is the same range as the retirement benefit.)
  • (You can also avail of the SSS Salary Loan, should you need a loan and can't get it from a bank. Read about it here.)
(Learn how to avail of your SSS benefits here.)

Not great benefits, but it does come at not-so-steep a price: a maximum of 581.30 for employees (starting January  2014) or 1,760 for freelancers and other voluntary members. Overall though, I'd still rather not make this investment. Here's why.

SSS vs Invest it Yourself


If you pay 500 a month (the previous max for employees), for your entire working life (say 21 to 65), you'll get over 4,000 per month. Possibly for life, so that might be 4.5K each month from 65 to 90. That's a total of  Php1,350,000. Seems like a great deal of money if we put it like that.

Especially since 500 a month over 44 years of working (from 21 to 65 years old) comes to about Php264,000. (Your employer contributes about twice what you do; but we won't consider that for now since it's not our money, and it's mandated by law.)

But, assuming you can save (for the first two years) and invest (for the remaining 42 years) that money instead, you could actually get a lumpsum of Php4,205,568.54 (assuming you invested in an equity fund and got 10% yearly returns).

Of course, you might get lower than that. Becasue Php1,000 is usually the minimum amount that various funds set for top-ups; so you'll be investing every other month instead of every month. Plus, towards the end you'll probably switch to safer, but lower-yielding investments.

But if we take all that into account and assume those changes gave you a very low 7% return on your investment, that still amounts to Php1,686,390.06. And that's money you have at 65 - not money you'll eventually get by 90.

The computation is even more lopsided for voluntary members. If you saved (for the first year) and invested (for the next 43 years) that 1,560 contribution(the previous max) and got a very low 7% return you'd still get Php5,306,468.66 at 65. Huge difference, right?

But you still need SSS


For employees this is literally a no-brainer. Contributions are set by law. 

For freelancers and other voluntary members, the situation is different. Aside from your capability to pay the max, you'll have to consider how important getting bigger benefit payouts is to you. After all, you'll get a payout just for being a member.

Personally if you're worried about health you're better off with Philhealth and health insurance. Especially since SSS maternity benefits does not seem to take into account your contributon amount. If you're a member and have paid 3 of the last 12 months, you get your 60 days of salary (or max of 30k or 39k).

Regarding the disability, death and funeral benefits: An insurance might give better payouts too. But since that would be a separate bill to pay, you'd have to compute and determine just how much more you'd need on top of these SSS benefits.

For retirement, it's obvious we can't rely on SSS. Last I checked, retirement plans aren't that great either. If we want to retire well, we've got no other recourse than to invest wisely for it.

However, I can't say paying the minimum (or any amount in between) is better than the max. That's going to have to be a personal decision for freelancers and other voluntary members.

But I do recommend that you become a member, if you can afford it. Especially if you'll still have even a small amount of money left to invest afterwards.

Becoming a member


To be an SSS member, you'll have to accomplish an SSS Form E-1 and submit it together with original (or certified true copy) and photocopy of any of the following: baptismal, birth certificate, driver’s license, passport, Professional Regulation Commission (PRC) Card or Seaman’s Book.

(visit their official site: https://www.sss.gov.ph for more information on how to register.)



If you liked this article, please subscribe to my feed, like me on Facebook, circle me on Google+, or follow me Twitter @thePFApprentice. It's free, you won't miss new articles, and you'll also get my free ebook: the Super Savings Guide.

Enter your email address for your free subscription




No comments:

Post a Comment