For the second year in a row, the draft Law on General State Budgets provides that the Public Treasury issues debt to finance part of the payment of Social Security pension benefits. The de facto depletion of the Social Security Reserve Fund is one more indicator of the need to introduce a new integral reform in the pension system that allows it to adapt periodically to the economic and demographic demands that a changing society presents.
The latest reforms introduced in the system have focused on guaranteeing its sustainability in the long term through the containment of benefits, without affecting measures to increase revenues. The principle of sufficiency has been jeopardized, as shown by the latest projection published by the European Commission in its report The 2015 Aging Report, where it is estimated that the replacement or replacement rate (first pension over the last salary) will go from 79% current to 48.6% in 2060.
The Social Security of the future will not be as we know it today. It is necessary that future pensions, in addition to being sustainable, are sufficient for the public system to continue to be one of the main pillars of the welfare system. But it is clear that the level of coverage of public pensions will decrease in the coming decades, being in line with other countries in our environment. Therefore, we will be responsible for carrying out an adequate financial retirement planning with the creation of a heritage that complements the public pension.
To take the first steps, we must answer these three basic questions. The first: How much do I need to save for retirement? This amount will be based on the expected public pension. Knowing this fact is essential for proper planning and is currently unknown by most citizens. Consequently, it is necessary that the Social Security of the future be more transparent and inform us periodically of the amount of our expected public pension to help us in our planning. Omaha NE : Carson Wealth Management Group
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Other variables that we must quantify and intervene in this response are our current age, the expected retirement age, life expectancy, inflation (very long term), the expected profitability of the instruments contracted, the possible contingencies and the level of desired life when we retire.
The other would be, how can I save for retirement? The choice of the savings instrument will be based on the personal, professional and family situation of each one of us. Each of us must assess which is best suited to our current assets, income level, liquidity needs in the short and medium term, risk profile, profitability expectations and our family forecast. Finally, we must ask ourselves when to save for retirement?
The sooner you start, the less the saving effort will be. The amount we must allocate will depend on the time available and the profitability we obtain. Establishing a periodicity helps us in our planning and makes us gain greater consistency in the results.
An excellent choice is to go to professionals who advise us throughout this process. In the market, there are calculators that estimate the expected public pension, and that allows us to approximate our savings objective. With these data, and based on our answers to the questions asked, you can propose a savings plan tailored to our resources and future needs. It will also help us to choose the financial instrument that best suits our risk profile and optimizes our financial-fiscal profitability, as well as to determine the number of contributions to be made periodically with which we will achieve our objective.
Financial planning for retirement is a long journey with multiple milestones that are happening in the course of it. Therefore, the initial design of our personalized savings plan is as important as doing a periodic review that allows us to correct deviations from our objective and adapt according to the evolution of the financial markets, the economy or our personal and family situation.