Suppose you want to maintain the purchasing power of your working life after retirement. In that case, you need to calculate your expenses and income well and look for supplements to the public pension.
Workers often think about retirement. The endpoint of a working career means more free time to spend resting, enjoying oneself, spending more time with family and friends, traveling, and studying. However, it also entails essential changes in the economic situation. The income received by a retiree is less than the salary received in their last job since the salary typically grows as years of experience accumulate.
Many citizens expect to maintain the same standard of living they had when they were working when they retired, but this does not usually happen by magic. According to OECD calculations, Spaniards, for example, receive a pension equivalent to 72.3% of their salary at the end of their working lives. Therefore, it is advisable to generate complementary sources of income to use in the future. Good planning is essential to enjoy your retirement years with peace of mind. Here are five steps for planning your retirement.
Calculating the amount of the retirement benefit
If an individual wants to plan for retirement, the first thing to do is estimate the income they receive from that moment. In other words, calculate the retirement benefit amount due after working life. The Finect platform has developed a calculator so that users can calculate how much pension they will have when they retire. The minimum pension is 721.14 euros per month in 14 payments, and the maximum is 2,819.1 euros.
The first step is to analyze what kind of life you want to lead in retirement and how much money you need to achieve it. According to experts, to maintain the pre-retirement standard of living during retirement, it will be necessary to have between 70 and 80 percent of the income earned while working. One of the most common mistakes in this step is underestimating the expenses incurred. It is because by having more leisure time, the retiree can spend more, adding new health-related disbursements.
Analyzing expenses and estimating future outlays
Once you have a rough idea of the pension you will receive, analyzing the expenses you expect to incur in retirement is a good idea. You can start by carrying out complete control of current outlays. The more detailed, the better, and then estimate other possible expenses. For example, if you want to take more trips, you must calculate how much they will cost. People often underestimate retirement expenses, as there may be some extraordinary expenses, such as the need to hire staff or pay for a residence.
Start saving as soon as possible.
Citizens who want to maintain their purchasing power once they retire must make the income difference between their pension and salary. It would be best if you started saving; the sooner, the better. Financial advisors recommend starting by saving 10% of your income for retirement. Moreover, this percentage should increase progressively as retirement age approaches. It does not matter if the initial amount is small. The most important thing is that saving becomes a habit.
Taking out a savings product
Once you have started saving, the next step is to make the most of your money. There are many financial products on the market to obtain additional income in addition to the public pension. One of the best-known savings products is pension plans, designed specifically for this purpose.
The popularity of pension plans lies in their tax benefits since the contributions made during a year reduce the taxable income for personal income tax purposes. Following the approval of the General State Budget for 2022, the maximum deduction amount has been 1,500 euros since January 1.
From saver to investor
Pension plans are now less interesting for consumers since its cut. Therefore, switching from saver to investor is advisable to get more out of savings. But first, however, it is advisable to build up a good buffer for unforeseen events. Experts recommend having at least the amount needed to cover fixed expenses for three months in case of unforeseen events.
Once this emergency fund is in place, one can go from being a saver to an investor. Today, many alternatives allow users to get a supplement to the public benefit. Finect has a showcase of financial products for retirement. It allows users to find a wide range of options to prepare for their retirement and choose the one that best suits their needs.