Financial establishments have products for planning your retirement.

“There is a belief that the amount of money that will be needed during retirement is lower, but it is not. We must replace around 90% of our annual income. As it is a high percentage, we must allocate 15% to 20% of our annual income to retirement ”, stated López. To illustrate: if a person earns $ 30,000 a year, it would be between $ 4,500 (15%) and $ 6,000 (20%).

Hence the time factor: the earlier the retirement savings start, the more comfortable contributions will be, and in the case of investment contributions, they could benefit from being participating for a long time (between 20 to 40 years) in the Stock market. While there are no guarantees that this will happen, historically, it has been observed that time has favored long-term investors, giving them the opportunity to overcome market swings, López said.

Options for your retirement

Financial establishments have products for planning your retirement. The most common are:

1. Defined contribution plans

2. Individual retirement accounts (IRA)

3. Annuities (which work similar to Social Security)

4. Life insurance

In the case of well-defined contribution plans and IRAs, both offer the advantage that:

• You can decide how much to contribute. These contributions are deductible from your tax liability, up to certain limits.

• You do not pay contributions on the amounts while they are participated in giving up work plans. In IRA accounts, you could shelve taxation until it is time to withdraw or pay on contributions and not for the money accumulated when withdrawing it, if certain requirements are met. Each product has different contributory characteristics and must be taken into consideration when making a selection.

• In the defined contribution plan and IRAs tied to the stock market, you could benefit from the returns (interest or appreciation in value) that could be generated by the instruments that you or your financial advisor choose.

The retirement date dilemma

Withdrawing after your initially scheduled date is not a problem - after all, with good planning, your finances should be ready by then. Withdrawing before your due date could be a risk if you have not prepared for that possible eventuality.

“More than half of the people leave the workforce earlier than expected. Most do it for family or health reasons. We think that the decision to withdraw is solely up to us and we do not realize that there may be external factors that we do not control, ”López explained.

An earlier retirement, he said, means more time for which the salary that was received must be replaced , as well as a revision of the planning done to maximize profits and reduce investment losses.

A final issue, López added, is to avoid taking money out of withdrawal explanations earlier than expected, because in calculation to reducing your retirement properties, it could have other aftermaths, such as having to pay contributions and not benefiting from the benefits. long-term interest and growth of those assets.

 

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