Saving for retirement should be a universal principle for everyone, those who quote a lot and those who quote little, those who like risk and those who do not. The current situation means that in the medium term we inevitably go towards lower pensions because of the greater weight of the pensioner population and because of an obligation to contribute a number to get 100% of the pension more and more complicated, as there are more years and more complicated to achieve it when young people join the labor market much later, at least in a stable way.
With all this, we emphasize, it is important to plan and, as far as possible, to do it as soon as possible to more easily achieve our objectives, which is to have a capital or income that assures us all the necessary well-being when we retire. This capital is made up of two variables, the capital that we are contributing to which we must add or subtract the generated profit, a return that the longer the product has, will be more important.
Profitability and risk
The profitability of investments is closely linked to the concept of risk, and vice versa. Under normal circumstances, the more risk you are willing to take, the more profitability you can get but the potential losses are also higher. Let’s say for example the Stock Exchange. If we analyze, for example, its 20-year performance and calculate it annually, historical series outperforms other assets considered safe, but if you invest in a shorter time horizon, for example, 5-10 years, and you encounter a crisis financial like the one we just lived, what you get are losses. In other words, having a long term investment allows us to be able to bet on products with more risky investments, but with moments when risk can lead to losing part of what has been earned.
These possibilities must always contrast with our risk profile. The risk profile defines our ability and attitude to tolerate losses that may occur in investments. If we do not want to have losses, even if we start saving a lot of time in advance, we should only bet on products that guarantee our capital such as the Aegon Insurance Plan (PPA), with an interest rate of 1.5% on the 4 first months and currently an assured minimum of 0.6%. If your profile is more risky and you are tolerant to take losses, you can choose other alternatives of more risk.
Of course, you always have to adjust the investment to the remaining time for your retirement. As this moment approaches, it is necessary to protect the accumulated savings, consolidate it, choosing lower risk products such as PPAs. The objective is to reduce the chances of losses or even eliminate them to ensure everything saved and earned in the years of preparation for retirement.