HomeFINANCEHow to save for retirement if you are a millennial?

How to save for retirement if you are a millennial?

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Are you a millennial and worried about your future? Learn 3 ways to save for retirement if you’re part of the millennial generation. Start planning your retirement.

According to data from the National Commission for the Protection and Defense of Users of Financial Services (Condusef), it is estimated that 50% of workers in Mexico by 2025 will be millennials.

In Mexico, no millennial will retire with a pension, which is an amount that is received monthly from social security.

Likewise, all the people who have started contributing to the IMSS after 1997 will retire only with the resources accumulated during their working life.

Due to the above, the National Commission of the Retirement Savings System (Consar) in 2019, warned that millennial workers could receive a pension of $2,000.00 MXN.

If you are from this social group and you are worried about your future, we tell you the best way to save for retirement if you are millennial.

How to save for retirement if you are a millennial?

  • Be affiliated with an Afore
  • Have an investment fund in a bank
  • Have a voluntary savings in an Afore

Be affiliated with an Afore

If you are registered with the IMSS or ISSSTE for your work, you should know that you have the right to join a retirement fund manager (Afore) for being a beneficiary of Infonavit or Fovissste.

The Afore is responsible for deducting an amount from your monthly salary, which is complemented by employer and government contributions, equivalent to 6.5% of salary.

These resources will serve to pay for retirement and are managed and invested by the Afore you have contracted.

However, these savings will only be enough for you to retire with the equivalent of 30% of the last salary of your working life or replacement rate.

The only alternative you have to live comfortably during retirement is to make constant voluntary contributions to the Afore from the first years of your working life. By doing so you will be raising the replacement rate from 46% to 70%.

If the Afore you hired does not meet your expectations, choose another that suits your needs, taking into account:

  • Yields: the profits obtained by investing your savings.
  • Commissions: the amount that the Afore institutions charge to manage the resources of your account, choose the one with the lowest commission since it is greater savings.
  • Services: Afores can manage and invest your resources, send account statements and provide telephone, internet or face-to-face service.

As a beneficiary of Infonavit or Fovissste, you can use the Balance of the Housing Subaccount for the retirement savings by not applying for a mortgage loan to buy a house.

Have an investment fund in a bank

If you do not want to save through an Afore, you can opt for the best way to save for retirement, through an investment fund or have your own savings plan.

An investment fund consists of making economic contributions to invest and manage resources in order to acquire better shares for the estate. It is carried out between a group of people and is invested jointly to achieve greater investment.

Likewise, to enter your money into an investment fund you must go to the financial institution and the bank will prepare a term investment plan based on the conditions, returns and commissions you choose.

In addition, some institutions allow the resources of the investment fund to be used without penalties. We recommend that you do not use the money until retirement.

Have a voluntary savings in an Afore

If you are a freelancer, you also have the option of contracting an Afore and opening an individual account, but you will be solely responsible for entering the resources into the account.

In addition, you only need to deposit voluntary contributions to the individual account, without establishing minimum or maximum amounts, you will do so according to your possibilities.

Voluntary savings in an Afore has the following benefits:

  • Save for retirement and increase the amount you will have when you retire.
  • Achieve short, medium and long term goals.
  • Have the money every two or six months depending on the Afore.
  • Voluntary savings may be tax deductible.
  • You can inherit the assets you generate and leave the beneficiaries protected.

Register formally to start depositing your voluntary contributions, you can do it through direct debitconvenience stores, window, internet or via cell phone.

Finally, the resources of your voluntary savings are protected by the National Commission of the Retirement System (Consar).

Before choosing the best way to save for retirement, it is important that you visualize your future. We advise you to increase your pension savings from your first job until the end of your working life.

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