Should You Invest In Pera?

Stock Smarts

18 Dec 202213:36

Summary

TLDRIn this video, Marvin Germo discusses the Pera (Personal Equity and Return Account) system, a retirement investment program for Filipinos. He explains that Pera is an acronym for personal equity return environment account, similar to the 401K in the USA. Germo emphasizes the importance of saving and investing for retirement, especially for Filipinos who often lack proper planning. He highlights the tax advantages of Pera, such as reduced withholding tax and exemption from estate taxes, making it an attractive option for long-term investments. However, he also points out the current cap on annual contributions as a limitation. The video is aimed at encouraging viewers to take control of their financial future and make informed investment decisions.

Takeaways

😀 The speaker emphasizes the importance of planning for retirement to ensure enjoyment of life at older ages.
💡 The term 'Pera' is introduced as an acronym for Personal Equity Return Account, which is a concept similar to the 401K in the USA.
🌟 The speaker highlights that Filipinos generally do not save or plan for retirement, and Pera could be a step towards encouraging this.
📅 Pera was enacted into law in 2008, but it hasn't gained as much traction as it should, according to the speaker.
💼 The speaker suggests that having multiple income sources, including retirement plans, can provide better financial security in old age.
🏦 The Pera program is voluntary and can be availed by income earners who are Filipino citizens, aged 18 and above, and have a TIN.
💰 The program allows for tax advantages, such as a reduced withholding tax rate, making it attractive for long-term investment.
🚫 The speaker points out a drawback: there is a maximum cap on the annual contribution to the Pera program.
📈 The Pera program is recommended for those who are not disciplined savers and have a long time frame for investment, but not for those nearing retirement.
🌐 The speaker, Marvin Germo, is a stock market trader and investor who shares knowledge to help others achieve financial freedom.

Q & A

What does 'Pera' stand for?
-Pera stands for Personal Equity Return Environment account.
Why is it important to start investing in Pera at a young age?
-Starting young in Pera allows for long-term passive investing, which can accumulate significant returns over time due to the power of compounding.
What is the significance of the Pera program for Filipinos?
-The Pera program is significant for Filipinos as it encourages retirement planning and saving, which is a step towards financial security for many who may not be currently planning for retirement.
When was the Pera program enacted into law?
-The Pera program was enacted into law in 2008.
What are the eligibility requirements for contributing to a Pera account?
-To be eligible for a Pera account, one must be a Filipino citizen, at least 18 years old, and have an income, whether self-employed or employed.
What are the conditions for withdrawing money from a Pera account?
-You can only take out money from a Pera account when you are above 55 years old, and you must have contributed for at least five years.
What are the tax advantages of investing in a Pera account?
-Investing in a Pera account offers tax advantages such as a 20% withholding tax on contributions, reduced taxes on dividends and capital gains, and exemption from estate taxes.
What is the current maximum cap for annual contributions to a Pera account?
-The script does not specify the current maximum cap, but it mentions that there is a limit and the speaker hopes for a revisit to increase it.
Who would benefit the most from the Pera program?
-The Pera program is most beneficial for those who are not disciplined enough to save and invest on their own, as it provides a structured way to save with additional incentives.
What types of investments can be made within a Pera account?
-Investments in a Pera account can include UITFs, mutual funds, stocks, exchange-traded funds, government securities, bonds traded in exchanges, annuities, and insurance pension products.
What is the speaker's advice for those nearing retirement?
-The speaker suggests that those nearing retirement should be more conservative with their investments and might not benefit as much from the Pera program due to their shorter time horizon.

Outlines

00:00

💼 Introduction to Pera

The speaker introduces the concept of Pera, which stands for Personal Equity return environment account, as a means for Filipinos to save and plan for retirement. It is an acronym that represents a voluntary retirement savings program akin to the 401K in the USA. The speaker emphasizes the need for Filipinos to start investing early to ensure financial security in their later years. The program was enacted into law in 2008 but has not gained much traction. The speaker also mentions that the program is open to those who are 18 years old and above, self-employed or employed, and of Filipino citizenship.

05:02

📈 Benefits of Pera

The speaker discusses the benefits of the Pera program, including the ability to withdraw funds after the age of 55 and having contributed for at least five years. He highlights the program's advantages, such as exposure to the equity market and the backing of large institutions, which can provide comfort to those unfamiliar with investing. The tax benefits are a significant draw, with a 20% withholding tax on contributions and no taxes on dividends and capital gains within the program. The speaker also mentions that there are no estate taxes on the funds, which can benefit one's heirs.

10:09

🚫 Limitations and Recommendations

The speaker points out the limitations of the Pera program, such as a maximum annual contribution cap. He suggests that the cap should be revisited to encourage larger contributions. The program is recommended for those who are not disciplined enough to save and invest on their own and for those with a long time frame before retirement. The speaker advises against it for those nearing retirement, suggesting a more conservative approach. He also encourages viewers to take action based on the information provided and to view investing as an insightful and not a boring endeavor. The speaker, Marvin Germo, is a stock market trader and investor who creates content to help others achieve financial freedom.

Mindmap

Keywords

💡Pera

Pera stands for 'Personal Equity and Retirement Account,' which is a voluntary retirement program in the Philippines designed to help Filipinos save for retirement with tax advantages. The video emphasizes its importance as a tool for long-term financial planning, offering benefits like tax exemptions and investment growth opportunities for individuals who contribute consistently over time.

💡Tax Advantages

The video highlights the tax advantages provided by the Pera program, including exemptions from certain taxes like withholding tax on dividends and capital gains tax. These tax benefits make it more attractive for Filipinos to invest for their retirement through the program, allowing them to maximize their returns compared to traditional savings or investments.

💡Retirement Planning

Retirement planning is a central theme of the video, with the speaker urging viewers to start preparing for their future financial needs by investing early in programs like Pera. The video discusses how proper planning ensures that individuals can maintain financial stability during their retirement years, which is critical as life expectancy increases and government support may be limited.

💡SSS and GSIS

The Social Security System (SSS) and Government Service Insurance System (GSIS) are mentioned as mandatory pension programs in the Philippines. The video explains that the Pera program can complement these existing retirement systems, providing an additional layer of security for individuals who want to diversify their retirement savings and gain more control over their investments.

💡Equity Market Exposure

The video discusses how Pera exposes individuals to the equity market, which can be intimidating for some Filipinos. Despite the perceived risk, the speaker highlights the long-term benefits of investing in equities, especially for younger individuals with a longer investment horizon. The equity market is seen as a vehicle for potentially higher returns compared to more conservative investments.

💡Income Earners

Income earners, whether self-employed or employed, are the primary target audience for the Pera program. The video explains that anyone generating income can contribute to Pera, provided they meet certain criteria like having a Tax Identification Number (TIN). This inclusivity allows a wide range of individuals to benefit from the program's tax advantages and long-term financial growth.

💡Voluntary Contributions

Unlike mandatory pension systems like SSS or GSIS, Pera is a voluntary program, meaning individuals can choose whether or not to contribute. The video emphasizes that this voluntary nature gives individuals flexibility in how they manage their retirement savings, but also requires discipline and foresight to take full advantage of the benefits.

💡Investment Cap

The video mentions a cap on the amount individuals can invest in Pera annually, which limits the contributions to a certain threshold. The speaker argues that while this cap encourages disciplined saving, it might also discourage those who are capable of contributing more from maximizing their retirement savings potential. The hope is that this cap will be revisited in the future to allow higher contributions.

💡Long-term Investment Horizon

The concept of a long-term investment horizon is repeatedly emphasized in the video, especially for younger individuals who have decades before retirement. The video stresses that starting early allows investments to compound over time, offering significantly greater returns than short-term savings. Pera is positioned as an ideal program for those with a long-term perspective.

💡Risk and Reward

Risk and reward is a concept addressed in the video, particularly in relation to the equity market. The speaker acknowledges that some Filipinos may be apprehensive about investing in stocks due to perceived risks, but highlights that the potential rewards over a long-term period can far outweigh the risks, especially when the investment is backed by large institutions and protected under the Pera program.

Highlights

The importance of planning for retirement and enjoying every moment of life.

The concept of 'Pera' as an acronym for Personal Equity return environment account.

The significance of the Pera program as a step towards encouraging Filipinos to save for retirement.

The Pera program being enacted into law in 2008 and its potential benefits.

The voluntary nature of the Pera program and how it complements other retirement plans like SSS.

The eligibility criteria for the Pera program, including being a Filipino citizen and having an income.

The rule that you can only withdraw from the Pera program after the age of 55 and after contributing for at least five years.

The tax advantages of the Pera program, including reduced withholding tax and no taxes on dividends and capital gains.

The potential for long-term passive investing with the Pera program, especially for those in their 20s and 30s.

The exemption of Pera investments from estate taxes, ensuring more inheritance for relatives.

The limitations of the Pera program, such as the maximum annual cap on contributions.

The types of investments allowed under the Pera program, including UITFs, mutual funds, stocks, and government securities.

The Pera program's suitability for those who are not disciplined enough to save and invest on their own.

Advice for older individuals nearing retirement to be more conservative with their investments.

The encouragement to execute and participate in the Pera program for a secure financial future.

The cyclical nature of recessions and how they should be used as opportunities to thrive rather than be destroyed.

The presenter's introduction and the resources available for those interested in learning more about investing.