Millennials vs retirement; how to improve your pension

Millennials are one of the generations with the greatest risk of having an impoverished old age, the lack of foresight through savings in formal mechanisms from an early age could generate a financial problem at the end of their working lives.

Despite the fact that close to 70% of workers are aware that they are most responsible for their retirement, only 26% save for that purpose. According to the National Survey of Financial Inclusion (ENIF), only five out of ten Mexicans between the ages of 30 and 44 have a retirement savings account, while only 17% of adults between the ages of 45 and 59 have savings. formal.

The vice president of linkage at Amafore, Mari Nieves Lanzagorta, explained that workers between 35 and 45 years old belonging to Law 97 will face a complicated panorama in the face of pensions whose income is more attached to survival than to quality of life. In addition, she added that despite the 2020 reform, young people who have just entered the world of work are vulnerable in a market with fewer formal jobs.

This how translates into problems to obtain a better quality of life at the time of retirement, workers who were registered with the Mexican Social Security Institute (IMSS) after July 1, 1997 belong to the so-called law 97, with which They have access to three pension models.

The life annuity is a model in which the worker, through the IMSS, contracts insurance with one of the indicated institutions, for which the accumulated balance in their individual account is used, which is managed by an Afore, in this way it is guaranteed the payment of a pension whose amount is predetermined by factors such as the amount found in the Afore as well as life expectancy.

According to Lockton Mexico Projections, hiring a life annuity in basic conditions has a cost of 3 to 5 million pesos per person, so currently if you want to have a pension above the minimum wage you should try to have sufficient savings to access this pension system.

If the resources to acquire a life annuity are not available, workers can access the programmed withdrawal model, this is contracted directly with the Afore in which they are registered, a calculation is made with the accumulated amount in the individual account and life expectancy and with this the amount to be received as a pension is obtained.

However, this resource will only be received until the money in the account is exhausted, so if the pensioner exceeds his life expectancy, he will be left unprotected.

The last option is the guaranteed pension, in this case if the worker does not have access to one of the two previous models, they can opt for this modality in which the federal government grants an amount equivalent to the minimum wage.

Lanzagorta explained that the millennial generation has less time to obtain the necessary amount to retire under a scheme that offers them financial well-being, for this reason he assured that the best way to change this panorama is to start making voluntary savings contributions to the Afore or opt by instruments such as the Personal Retirement Plan (PPR).

Instruments to improve retirement

Today there are different tools that allow you to have returns after constant savings, in addition to tax benefits. With the different methods you can ensure a pension amount that is in accordance with the quality of life that is sought for our old age.

Leonardo Castillo, an expert in personal finance from Fintual, advised that before choosing between the financial tools that exist, users should carry out an analysis of their savings possibilities.

The first step is to visualize how much money can be saved for this purpose, there are different instruments designed for all types of pockets. Castillo explained that one should think about whether a specific amount can be saved on a recurring basis or not, since mechanisms such as insurance require a fixed monthly amount and if the user does not comply with the payment, a penalty is charged.

It is recommended to review each of the financial instruments, for example some PPR may be an option if you plan to save a certain monthly amount for a long term, but without exposing yourself to a penalty if on some occasion you cannot make the contribution.

On the other hand, if you choose to make savings contributions more sporadically, an option to increase the pension at the time of retirement may be to make voluntary savings to the retirement account.

Castillo recommended that, along with observing all the financial tools, factors such as age versus the years in which you want to withdraw should also be considered, since the younger you are, the amount required to meet sufficient savings for the withdrawal will be less.

joselyn.ugarte@eleconomista.mx