, there are many factors that indicate that this will not be, far from it, the last of the public system. What’s more, the increase in life expectancy and the drop in the birth rate, together with the lower contribution figures and higher unemployment figures, suggest that sooner rather than later the system will be reformed again. “In Spain we are enjoying one of the most generous public pension systems in the world, so, together with all these factors, the trend is to get worse,” shows Pere Font, financial adviser at Axa Executive, who can be found in the .
Therefore, if you do not want to lose your standard of living upon reaching retirement, it is inevitable to think of other sources of income away from the public system. “Thinking that when we can no longer work, the state will provide us with enough income to lead a dignified life seems very risky to us,” shares Santiago Gil, founding partner of Personal Family Office, also present at the Finect advisory service. If you’re thinking about starting your retirement piggy bank, this guide can help you along the way.
At what age should you start saving?
The first thing you hear when you hear about retirement is that the sooner you start saving, the better. Not only by beginning to establish a discipline but by the magic of compound interest, that is to say, generating returns on benefits over time, which ends up causing a multiplier effect by having an increasing capital. But you have to be aware of the reality of the labor market, “at the beginning of working life, the worker usually has other priorities (Become independent, purchase a vehicle or home…) to which they usually allocate 100% of their income or even more consuming via indebtedness”, points out Santiago Gil.
In addition, “the most common thing is that a person does not consider a stable future until they are 35 years old, although the truth is that many young people aware of the serious population problem we have and of the economic consequences derived from Covid-19 have put their hands before get to work with savings,” says José Manuel Marín, financial advisor to Fortuna and also a member of the Finect advisory platform. In any case, experts say that it is never too late to start. Of course, the later you start, the greater the effort that has to be made.
How much to save?
Many will say that the amount does not matter, if not the discipline and perseverance in saving. But Manuel Marín remembers a financial rule that, necessarily, must go in this same order. When the payroll arrives, first, 20% is withdrawn for savings; second, fixed survival expenses (rent or mortgage, supplies, food, transportation…) are covered with 50%; and, finally, 30% for variable leisure expenses. “A change in mentality is necessary, you don’t save if you have left over after spending; but as Robert Kiyosaki said, first you have to pay yourself, first you save and adapt your standard of living with what is left over,” says the financial advisor of Fortune.
Where to invest?
Once the savings routine is established, it is important to obtain a return on that amount, especially if the term of the objective is as long as retirement, since the longer the investment time, the lower the possibility of loss of assets.
But where to invest? “With the latest reform, pension plans have reached their particular Finisterre and other alternatives have gained strength such as PIAS, sialp, unit linked or investment funds,” says José Manuel Marín. To show the entry of the 10,000 million euros more, in relation to 2020, that the investment funds have received during the first quarter of the year. Of course, the adviser warns that there is no perfect product and that each alternative must be analyzed from the perspective of the ‘investment diamond’: profitability, security, flexibility, inflation and taxation.
Gil is also of the opinion that pension plans, although they are the most classic option, have long ceased to be a good option, except for certain circumstances, but that, without a doubt, with the latest limitations, they have now remained a residual option. Font, however, is not so against pension plans. “It is true that the latest tax reform has made them less attractive, but they should not be ruled out in our retirement planning,” he recommends.
In any case, if you want flexibility, Gil points to investment funds, and if you are looking for tax benefits, choose the alternative of Individual Systematic Savings Plans (PIAS), “they are usually a good option for young people who start saving” , says the Personal Family Office expert. In any case, for the selection of the best options or carrying out optimal planning, he invites us to have an advisor “to whom we can tell the details of our specific situation and who can guide us in the choice”. An idea that Font also supports, “in order to be able to make the right choice, we must resort to our trusted financial advisor, who will indicate which investment is most efficient for our objectives, assessing all the parameters, risk profile, investment term, volatility “.
What level of risk to take?
“Depending on our age, we can make more or less volatile investments, if the horizon is long-term, we can and should invest in riskier strategies and as we get closer to the saving redemption date, we should reduce the risk of our investments “, indicates Pere Font.
In any case, the most important thing is to be satisfied with the decision and take only the level of risk that you are capable of assuming. No matter how young you are, if you don’t feel comfortable with the level of risk in your portfolio when the market goes down, bad decisions, made based on fear and mistrust, can accentuate your loss and even make you lose money. , cannot be recovered.
In my bank or outside?
One of the doubts that many savers face when starting to invest is whether to start doing it with their own bank or outside. “I don’t know of any bank that offers good advice or good products on this subject. They tend to be more concerned with selling what they are interested in placing than what is a good alternative for their clients. It is undoubtedly better by looking for an advisor in other ways specialist in this field”, admits Gil.
“The main business of the banks is to raise capital as cheaply as possible and then lend it as expensively as possible, so we don’t expect much happiness from our trusted bank in savings products,” adds Marín. Even so, the important thing is always to compare and be attentive to the commissions and the profitability of the products that are contracted, whether in the bank of a lifetime or outside it.