Want to know how to maximize Pag-IBIG MP2 profit in 2022?
All you have to do is read our article on how to get the most out of your MP2 savings. But, before we dive deeper into this topic, let’s have a quick background on what is Pag-IBIG MP2 is.
Pag-IBIG MP2 or the Modified Pag-IBIG Savings Program 2 is one of the passive income options available in the market. To open an account, all you need to do is go into a Pag-IBIG branch and fill out an application form.
If you already have a Pag-IBIG MID number, you can enroll online using this link.
Also, it has a long history of outperforming savings accounts and time deposits in terms of long-term performance. One benefit is that your investment is backed by the Philippine Government.
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Is Pag-IBIG MP2 Perfect for You
Due to the low risk of financial loss, it may appeal to cautious investors. It is deemed safe because the amount you invest is guaranteed by the government and it pays tax-free dividends.
MP2 is best for conservative investors. Hence, it is best to maximize Pag-IBIG MP2 to make the most out of it.
Data from the Pag-IBIG website revealed an average of 6% from 2011 to 2020. From 2016 to 2020, the average dividend rate is 7%.
However, there is a 5-year lock-in term. While you may withdraw at any moment and receive your funds back, the dividends sent to your account may not be at the full rate.
Nonetheless, it provides an alternative savings vehicle to those provided by banks and cooperatives.
How to Maximize Pag-IBIG MP2 Income
Now that you’ve seen the possible profits, you may be wondering how to save money and if there is a single technique that will help you get the most out of the Pag-IBIG MP2 program.
In this section, we will discuss various strategies to for you maximize Pag-IBIG MP2 passive income.
In this article, we will give answers to the following questions:
- Do you get bigger returns when saving monthly or annually?
- Which has higher return on investment (ROI): investing one-time or regularly?
- Would it make sense to get the dividends every year or at the end of lock-in period?
This article does not specify how often you should save. It only considers the consequences of saving monthly, yearly, or once, as well as taking the income annually.
Maximize Pag-IBIG MP2: Monthly Versus Annually
Which do you think is better? Saving every month or starting at the beginning of the year? To answer this, let’s do the quick math.
The minimum amount to start saving is ₱500, so let’s assume you’ll contribute ₱500 monthly or ₱6,000 annually.
Then, take the average dividend rate over the last five years. This is the correct forecast to use rather than the most recent one because the forecast is 5 years in the future, which also corresponds to the MP2 lock-in period.
It also captures the rate’s highs and lows over time. Again, past performance does not guarantee future results.
Here’s how the money is expected to grow over the next five years.
As you can see, saving annually outperforms saving monthly in the long term. Even if your total savings in both cases is theoretically the same (₱30,000).
That is not to argue that you should put ₱500 in a piggy bank each month and make a contribution when it reaches ₱6,000.
Why? Because your piggy bank causes your money to lie idle, earning nothing more than it would have if it had been invested elsewhere while it is accumulating.
If you can afford to save ₱500 every month, the preferable method is to deposit it in MP2 rather than a piggy bank.
Overall, yearly contributions are great for persons who get a windfall every year, such as a 13th-month pay, incentives, or Christmas presents from godparents. Instead of squandering your excess money, you may put it towards your MP2.
That’s the first method to maximize Pag-IBIG MP2 profit in 2022. Continue reading to learn more.
Maximize Pag-IBIG MP2: Investing Regularly versus Investing One-Time
The second question is whether to invest in Pag-IBIG MP2 on a regular or one-time basis. Which technique provides the best bang for your buck?
Again, math will be utilized to solve this question. Assume you contribute ₱500 each month to your investment account on a regular basis.
The one-time payment is set at ₱30,000 since the lock-in duration is 5 years. That’s 500 times 12 months multiplied by 5 years. The same average dividend rate is used to construct projections for the following five years, as in the preceding example.
It is evident from the table.
Investing a one-time lump sum payment yields a higher return on investment (ROI) than recurring monthly contributions. After 5 years, the potential earnings are ₱41,277 against ₱35,614 from the monthly savings.
What about a recurring contribution vs a one-time investment? The one-time strategy offers an advantage.
According to the preceding example, the total sum for the yearly plan at the end of the lock-in period is ₱36,479, which is still less than what you may expect from the one-time strategy.
What does it mean?
If you have the money to spare over the next half-decade, investing it in MP2 once makes sense.
So, if you’ve been given an inheritance, made a large commission, or received a windfall, this technique can help you grow your money.
However, if you can just save on a regular basis, it is also OK. Don’t feel bad about it.
It’s also worth noting that you’re better off depositing a tiny amount into MP2 on a monthly basis rather than saving in a piggy bank and only investing when it exceeds ₱30,000. You’ll miss out on the possibility of passive income.
We are not done yet with strategies to maximize PAG-IBIG MP2 income. Read the next section for another strategy.
Maximize Pag-IBIG MP2: Annual or Compounded Dividend?
As you may be aware, you have two options for receiving your dividends. You can either receive it annually or wait until the end of the 5-year lock-in period.
Is it better to let the dividend compound or to get it at the end of the year?
Consider opening two MP2 accounts with the same one-time savings of ₱30,000 at the same time.
With one (1st MP2) account, you hold the dividend for 5 years and then withdraw it. The other account (2nd MP2) receives the dividends annually.
Let’s compare in the table below and see which option maximizes Pag-IBIG MP2 income.
As you can see, the first MP2 is the better of the two. Your total investment is now worth ₱41,277 after fifth year. That’s a total of ₱11,277 in dividends over the period. For the second MP2, you’d get ₱39,885 with a total of ₱9,885 in dividends spread out over the next year until the lock-in period expires.
What’s the verdict? Patience is a virtue, and it is one that will be rewarded in the end. Wait until the lock-in period expires if you can.
However, if you believe that receiving the dividend each year would be beneficial to you, such as paying for your child’s tuition or adding to your yearly budget, then go ahead.
Conclusion: How to Maximize Pag-IBIG MP2 Income
Now, we are not suggesting that you should all invest in lump sums. In fact, I’m not suggesting that you go with MP2 right now.
Instead, assess your financial situation, set a financial goal, learn more about passive income options such as mutual funds, exchange-traded funds, UITFs, PERAs, and VULs, and compare.
The goal of this article is to review these strategies to maximize Pag-IBIG MP2 income by using math to forecast future savings growth for MP2. Past dividend performance is no guarantee of future dividends. The actual dividend would be different.
What we can do is demonstrate how these strategies would perform over time. So don’t feel bad if you don’t make a lot of money or save a lot of money. Not everyone has a large sum of money to invest one-time or even yearly.
If you have a five-year financial goal, setting aside a small amount on a regular basis to Pag-IBIG MP2 or other investment options may still be preferable than letting your money sit in a piggy bank.
At the end of the day, only you can decide how you save and invest and put it to get the best return. What we can do is assist you in understanding the implications of such a decision.
Strategies to Maximize Pag-IBIG MP2 Savings Account
- Never put money in a piggy bank and then only contribute to Pag-IBIG MP2 once it reaches a certain amount. You’re missing out on a chance to earn while saving.
- When money is tight, it’s okay to contribute the bare minimum. Regular saving beats no saving.
- Putting annual windfalls like bonuses or Christmas gifts one-time is preferable to spreading them throughout the year.
- MP2 is also great for one-time saving, which can be more profitable than spreading your money over 5 years.
- Annual dividend payout suits those who want their gains every year, while compounding gains over five years suits those who can afford to wait for better returns.
Thank you for reading our article on how to maximize your Pag-IBIG MP2 income. Please share this post if you find it useful.