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pensions.  Learn to save for a smoother retirement

pensions. Learn to save for a smoother retirement

For the next year, the legal retirement age has been raised to 66 years and seven months. The good news has been pushed back to 2023, when the age for obtaining an old-age pension for the first time in the country will drop to 66 years and four months. This represents a decrease of three months compared to the age for obtaining the required old-age pension in 2022 and two months compared to 2021. This decrease was driven by a decrease in life expectancy of 65 years.

Data from the National Institute of Statistics (INE) revealed that this indicator – which shows the average number of years a person is expected to live after turning 65 – fell to 19.35 in the 2019-2021 triennium. A development, according to the National Institute of Statistics, that results from an increase in the number of deaths in the context of the epidemic.

However, workers who apply for early retirement in 2022 will have a lower penalty in the old-age pension amount due to the sustainability factor due to the decline in life expectancy of 65 years in the 2019-2021 triennium.

The reduction associated with the sustainability factor applies to pre-requisite pensions, except for exceptional cases provided for by law. These old-age pensions are also subject to a reduction of 0.5% for each prospective month, due to the age of access to an old-age pension or the personal age for obtaining an old-age pension.

Just this week, the Organization for Economic Co-operation and Development criticized the Portuguese sustainability factor created in 2007, which was subsequently revised, and praised the simplicity of its calculation formula. And the alerts don’t stop there. The pandemic crisis will delay the entry of many young people into the labor market, who will receive less money. The Organization for Economic Co-operation and Development warned in a study that reveals an increase in the retirement age in Portugal.

But for future retirees, the crisis could cast a shadow over retirement. Young people have been severely affected by the economic and social effects of the crisis and may see future benefits dwindling, particularly if the pandemic leads to long-term scars and difficulties in building their careers.”

However, not all workers intend to leave working life when they reach the legal retirement age. Indeed, those who prolong their professional activity are rewarded. If you retire after only 66 years and 6 months, you will be entitled to a subsidized pension. The amount of this award varies depending on the number of years of contributions. For each month over your statutory (or personal) retirement age, you benefit from a percentage increase in the amount of your pension.

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This percentage is multiplied by the number of months worked after reaching retirement age.

alternatives Experts have been warning about the problem for a long time. The best thing is to create alternative solutions so that you can live more freely. The offer is varied and you just have to choose the one that best suits your situation.

To better achieve this goal, you should set goals, define terms and amounts of savings, in order to monetize this amount. Ideally, to be meaningful, savings should be in the range of 5-10% of your monthly salary, over a lifetime. But there are experts who advise consumers to allocate between 10% and 15% of their monthly salary. For this reason, discipline is one of the golden rules that you must follow to ensure a more relaxed retirement.

In addition, you should invest in products that guarantee a return on capital above inflation – a general rise in prices that affects the purchasing power of money – a situation that is not always taken care of nowadays. For example, a thousand euros today may be worth less in the future, the reason being the devaluation of money due to inflation.

The ideal option is to bet on products that guarantee high returns, and in most cases this bet ends up being drawn back on products without a guarantee of capital. The truth is that returns vary, but this risk also allows you to generate a higher return.

Setting a fixed amount of salary to save and scheduling transfers can help keep savings accurate. And in this case, to facilitate the task, the ideal option would be to make savings when you receive your salary.

The sooner you start this task, the better. This is because the more time you have until retirement, the more likely you are to see your money grow, by capitalizing your investments. But let’s face it: if you’re 50 and you save €75 per month for a retirement nest egg and you apply that amount to a product that earns you an average of 4% per year, you’ll reach retirement age with just over €18,000 saved. However, if you start saving 15 years ago, the nest egg will reach 51,000 euros.


Savings and Retirement Plan (PPR)

The main advantage of PPRs was the tax benefits they offered, allowing a deduction of 20% on annual payments of up to 300, 350 or 400 euros, depending on the age of the subscriber. But since 2015, the rules have changed: limits are based on age (€400 up to 35 years old, €350 between 35 and 50 years old or €300 for those over 50), along with limits on total group discounts.

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Most PPRs are capital secured, so the risk profile is moderate. For Deco, those who are less than ten years away from repair should apply more money in PPR so that they can redeem at age 60 without problems. Those between the ages of 40 and 55 can continue to invest, because some interest rates are more attractive than deposits.

Repair Certificates

Also known as State PPR. The product was launched in March 2008, and at that time, it presented itself as an alternative to retirement supplements. Depending on your age, you can deduct 2%, 4% or 6% from your salary each month. This means that you will only reach your maximum benefits if you have a monthly income of more than 3,645 euros (if you take a 4% discount) or more than 7,292 euros (2% off).

These discounts go to some kind of state-run fund. The pension supplement will be higher the earlier you join the system and the higher the surrender rate. Investors do not have the freedom to choose the most suitable product for their profile and have the option to put them on hold, but they can only do this in February of each year.

Treasury certificates

Treasury Certificates of Savings Value (CTP) came to replace Treasury Certificates, but they remain an alternative to long-term deposits. On average, new certificates pay 1% over seven years from vesting. But you have to hold the bonds until the end to make that return.

Like the previous product, the rate is increasing: 0.7% in the first two years, the rate rises to 0.8%, 0.9%, and 1% in the following years, and in the sixth and seventh years, titles offer a bonus of 1.3% and 1.6%. The capital is guaranteed, but although early redemption is allowed, it is more suitable for medium and long-term investments.

investment funds

It consists of several individual investments that are applied together in different financial markets and values, such as stocks, real estate, etc. That is, small investors hand over their savings to a professional manager. Whenever the investor wishes, he can redeem the respective investment from the fund. These always have the advantage of having portfolios with some diversification and where it is possible to invest small amounts.

Those who avoid risk can bet on real estate funds. Those looking for a medium and long term investment can invest in bond funds, and those who want to avoid risks can bet on equity funds. The truth is that the higher the risk, the higher the return.

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pension funds

Open pension funds are managed by management companies and are intended to finance the retirement plans of various members. However, these do not need any common bond. New memberships are always subject to acceptance by the administrative entity. It should be noted that these funds have different levels of exposure to stocks.

On the other hand, closed pension funds relate to only one member or, if there is more than one, when there is a commercial, group, professional or social connection between them, their consent is necessary for the new members to join the fund. It is up to the supervisor to issue the regulatory standards and carry out the inspection.

investor. See your profile

to be in the count

The risk is directly related to the amount you are willing to lose, in the end, to reach a certain return. The higher the risk, the higher the return. A good way to manage risk is to diversify your investment portfolio. Do not forget that the nature of the investor can be one of the main enemies of the investor. In the realm of feelings, fear and excessive ambition, as well as a lack of investor discipline, are obstacles to this whole business. Connected to the emotional component, the vast majority of investors are not ready or mentally prepared to incur losses, so they usually create mental defenses to preserve their investment.

conservative profile

The main objective of the investor is to preserve the amount invested. For this reason, it prefers low-risk investments and, as such, also has a limited expectation of profitability. In this case, you should invest, for example, in time deposits, savings certificates and capital insurance.

Moderate profile

The investor is already prepared to take significant risks in investments, in order to promote sustainable growth of the invested capital in the medium and long term. Investing, for example, in real estate funds, because they represent a moderate risk, since the capital is not guaranteed, but, as a rule, they yield more than time deposits.

dynamic profile

The main objective of the investor is to promote significant growth, in the medium and long term, of his investment portfolio. In this case, you take a high risk with the solutions you subscribe to and buy. If you are in this situation, betting on the stock market is one solution.