Mexicans today seem to be aware of the challenge they face for their future: 89% of them agrees that their own retirement funding is increasingly their own responsibility, according to the conclusions of Natixis Global Asset Management’s Global Retirement Index 2016, with Mexico ranking 35th in a list of 43 countries.
As the responsibility to finance retirement transfers from governments and employers to people, the need to increase contributions to savings becomes imperative. We believe voluntary contribution via the Afore account can be one of the best alternatives. By defining a savings plan for retirement, financial advisors may provide an added value to workers, with clear ideas and information on how to be better prepared for retirement.
“The pension system coverage in Mexico is still a challenge, and achieving security in retirement may still be difficult, although a possible goal if all the stakeholders — policymakers, employers and workers – contribute”, said Mauricio Giordano, Country Manager, Natixis Global Asset Management México, at the 1st National Afore Convention.
According to Giordano, the following 5 principles are a good starting point for a successful retirement plan:
- Define the spending needs in retirement: both advisors and workers should honestly assess their spending needs at the time of retiring, keeping in mind priorities such as mortgage or rent, healthcare, family, insurance and taxes. The lifestyle preferences such as travels, clubs and hobbies should also be considered.
- Match your retirement funds with your expenses: The key challenges to plan for retirement is how to finance expenses short and long term. Dividing financial commitments in mandatory and optional may help simplify the process to prioritize the spending patterns. The main goal for financial advisors and clients is to continuously and sustainably match funds with spending needs. Resources may include income from investment, social security, pensions and other sources.
- Plan for new risks in retirement: The fear to lose money is one of the biggest challenges for workers who save for their pension. This may make investment decisions difficult. Besides considering the traditional risks, retirement plans must consider additional risks such as longevity and inflation.
- Minimize fiscal impact: in case an investment portfolio is a main source of cash flow, it is essential to have an effective fiscal strategy. Financial advisors and their clients may resort to a tax professional to ensure an optimum fiscal efficiency.
- Commitment and Flexibility: Both for advisors and clients, establishing a plan to fund retirement and financial goals in retirement is a continuous process. It requires flexibility to adapt to changes in the interests and unexpected events such as healthcare issues or long term security. The most effective plans to finance retirement have the capacity to adjust to lifestyle changes.
“Our research shows clear findings: in those countries providing more security to their retirees, the government, employers and specialized investment firms offer incentives and innovative solutions so that workers have the tools they need to save for retirement,” concluded Giordano.
You can read the full report in the following link.
For Funds Society, Madrid
For Fórmate a Fondo