Saving for retirement more and more is being a basic goal for many people. And now that we are at the beginning of the year and it is a good time to put purposes for the new year that better than starting to save for your retirement .
This increase in concern about retirement savings is due to the fact that the public pension system is not evolving in an adequate manner
The news that the government has once again “pulled” the pension piggy bank to meet some expense is becoming more common, month after month. This has raised doubts about the future of the public pension system.
Doubts about whether it will exist in the future or, if it exists, if the amount of pension money will have sufficient purchasing power to live at least with dignity.
Given this, both people who are close to retirement and those who still have it further, have begun to think about saving for retirement . Savings that add additional income to the pension.
However, finding a financial product that works well to save for retirement is not easy, although at first it may seem that there are pension plans.
This is because pension plans are not ideal for everyone. Choosing the most appropriate financial product to save for retirement will depend, above all, on the personal situation and the present and future needs of each person . If you want to succeed in this goal.
First steps to save for retirement
The first thing is to be very clear that there is no single financial product to save for retirement.
There are products that are more effective than others , or at least, that a priori seem to be more focused towards this goal. But that does not mean that for you they are the best option
This will depend on your current economic situation, your needs and also your ability to save. Depending on how these 3 factors are, one financial product or another will interest.
Once this is clarified, you must start by defining how much money you can contribute to this goal, either monthly or annually, and for how long you must make this money contribution to achieve your goal of saving for retirement.
On the internet there are numerous calculators that will indicate this data depending on your saving capacity, the years you have left to retire and the profitability of these savings.
An important factor is the expected return on retirement savings . It is an important point because the higher the profitability, the less money you will have to save and for less time to reach your retirement goal.
In terms of profitability, a good goal to guide you is 3% per year but it can also vary depending on the years remaining to retire.
So I remember, in this first phase you should only worry about two things:
- How much you need / can save.
- During how much time.
Financial savings products for retirement
In 2016, pension growth was a meager 0.25%. Being the minimum pension of € 636 and the maximum of € 2,567.
This minimum increase, and those expected in the future , is a sign that it is necessary to supplement the pension at the time of retirement with other alternative income if you want to maintain your current purchasing power and live with dignity.
Therefore, it is important to start saving as soon as possible for retirement . In addition, the earlier you start the contributions may be smaller, affecting your current life less and more time you will have available to build a savings for your profitable retirement and that meets your purchasing power objectives.
At the moment, the safest savings products such as savings accounts and fixed-term deposits have the disadvantage of giving a very low return, so the growth of money for your retirement would be low.
This situation will not last forever, but while it lasts it may be interesting to look towards other options, perhaps with more risk but with more profitability potential.
In any case, we must not forget that being retirement savings a long-term or very long-term objective is not crazy to invest with a little more risk in exchange for greater profitability.
For all this, there are 3 main retirement savings products that are currently giving the best results:
- Pension plans.
- Investment funds.
- Savings insurance
Let’s see each of them individually.
Pension plans are the typical product to save for retirement . Although well selected and knowing its advantages and disadvantages are a good product to save for retirement.
As a main advantage we have its tax advantages during the duration of the plan and as a main disadvantage that it is an illiquid product and that at the time of the rescue its taxation is not good.
Investment funds are ideal for saving for retirement .
They are similar to pension plans but without the tax advantages although you can use the money whenever you want and do not have the problem of bad taxation at the time of retirement.
They have a great advantage in flexibility since you can transfer your money between types of funds depending on the economy, looking for more or less risk. And all at no cost.
Savings insurance is a very interesting alternative although little used to save for retirement.
They do not have liquidity like pension plans but have a sustained sustained profitability over time.
Saving for your retirement should be a goal for you, whatever your age and whatever your economic situation. It is not advisable to trust your quality of life in old age to whether or not there will be pensions and what their amount will be. You better start building your own retirement plan.
I hope I have helped you choose the best or the best savings products to invest your money for retirement. If you have questions or any questions, please use the comments.