Everyone wants to be financially free. And earnings from remote working can be a stepping stone towards that goal.
But it’s not enough to just earn money. You should also invest it so that money can work for you in the long run. So that eventually, you can retire!
But when do you start and how? Well, the PERA account might be a good option.
What is a PERA account?
PERA what? PERA stands for the Personal Equity and Retirement Account which was signed into law on August 22, 2008. It’s similar to Individual Retirement Accounts (IRA) in other developed countries.
A PERA account aims to provide Filipinos with an easier way to prepare for retirement as early as now.
It’s similar to your regular UITFs. You just have to choose your PERA custodian (the bank handling your PERA account) like BDO and BPI. And invest in the specific fund you want.
Usually, it ranges from low-risk funds (like funds invested in the money market and government funds) and high-risk funds (like equity funds).
You only need a TIN ID to apply for one. You can invest a maximum of 100,000 PHP per year or 200,000 per year for OFWs.
That’s simple enough.
But why invest in a PERA account over other options such as these simple investments?
Did you know that all your gains in UITFs, stocks, and mutual funds are taxed?
Yes, it goes as high as 20%! Imagine investing 1,000,000 PHP and it grew to 2,000,000 PHP over time after 20 years. A 200,000 PHP tax might be imposed on it.
With the PERA account, all your gains are tax-free! So you can have more money for your retirement.
5% Tax Credit
Do you want to legally decrease your taxes every year? You can get a 5% tax credit when you invest in a PERA account.
For example, you have invested the maximum of 100,000 PHP in your PERA account. That gives you a 5,000 PHP tax credit. It’s an immediate return of 5% per year for your money!
To get the tax credit, you just have to request your custodian for the PERA TCC within 60 days from the end of the calendar year.
Withdrawable on Your Retirement
The primary purpose of your PERA account is to save up for your retirement. That’s why it has restrictions on withdrawals.
You can only withdraw your PERA account when you reach at least 55 years old and contributed at least 5 years (not necessarily consecutive) to your PERA account
You might think, why is this a benefit?
Well, it stops you from spending the money on your purchases today. Ever had moments when you want to buy something impulsively? Now, you have to think twice before touching it.
But what if you really need the money? You can still withdraw it but with the following penalties.
- The 5 percent tax credit given to you for the entire period of the PERA
- A flat rate of 20% on the total income from the accounts.
There are also exemptions:
- If the purpose of withdrawal is to transfer to another PERA Investment Product Provider and/or another PERA administrator.
- If you experience accidents or illness-related hospitalization in excess of 30 days. It should accompany a duly notarized doctor’s certificate.
- Total Permanent Disability.
- Distribution of the proceeds to beneficiaries upon the death of a contributor.
There are many options to invest your hard-earned money. Just make sure to do your research and know the purpose of your investment.
When it comes to your retirement, the PERA account is surely a great alternative to include in your portfolio.
If you’re looking for a place to start remote working, you can register in Remote Staff! We offer long-term remote working jobs where you can start building your wealth. Cheers!