Today, social security is a central issue in the attention of public opinion; in fact in recent months the government is already working to launch possible reforms to innovate our social security system which today would seem to be no longer sustainable for SSA. .
What is the pension gap?
It is the quantification of the difference between the last earned income from work and the first retirement income, to date the scenario that lies ahead is quite hostile in fact on average we will retire with 60% of disposable income compared to the working one. Among the aspects to be taken into more consideration that can aggravate this income loss are inflation that will lead pensions to lose purchasing power in the coming years, and the factors linked to aging for which adequate financial resources are needed to be able to manage better. This process of awareness and analysis are factors related to proper financial planning that every self-employed or employee is preferable to do.
How can I structure a complementary pension activity?
Let’s start by giving a definition: The supplementary pension is a savings activity linked to a sum of money paid out in the form of an annuity or capital that supplements the occupational pension, mainly it is an activity that the taxpayer decides to do independently to protect his standard of living from possible financial stress that could occur in retirement, through the subscription of a recurring premium or single premium solution established by insurance companies, banks or asset management companies. Specifically, the premiums paid by the member are invested on the financial markets in order to give a certain response against inflation and to obtain returns that can generate capital over time. Quite different situation if you already have a capital and therefore there is no need to create it in the years before retirement, at that point the focus is on optimizing it in such a way as to protect it from inflation and give it an opportunity for growth with returns that would not be guaranteed if left available on the current account or by other deposit instruments. The most used tool in this regard is the single insurance premium which allocates resources a bit like the recurring premium but is distinguished by the frequency of payments, in fact, as you can well understand, only one payment is made.
Could this be the right path to take to bridge the pension gap?
I would certainly say yes because the retirement phase of a person who has chosen to deprive himself of a small part of income today and move it into the future will be better than those who have decided not to take into account the only certain risk that all producers of income they will face one day in their life.
Where are my savings invested? Can I take them back at any time or am I bound?
The instruments available to the member are many since they can be set up with different mixes of equity and bond component, based on the age of the member and their risk appetite. The choice of one instrument over another depends on the individual objectives , the time horizon and the risk appetite of each, which is evaluated together with the trusted consultant in the pre-contractual phase. In the case of stipulation of a recurring accumulation plan for social security purposes, the fundamental aspect is sustainability by the member of the payments to be made on a monthly, quarterly, half-yearly or annual basis, payments structured in such a way as to be modifiable and suspendable, but at the same time binding upon expiry if the set objective is to be achieved, to obtain a monthly annuity or the entire capital. Participation in this type of activity can be done by everyone, from infants to over 65s. Obviously, the sooner you start, the lower the monthly amount needed and the less market fluctuations will affect. Time is in fact the main ally in this type of activity.
In case I fail to honor my commitments, will I lose my money?
In the event that despite the planning work well done, the member is unable to “due to an unforeseen event” ( not adequately assessed at the signing stage), to carry out the signed plan, he can interrupt the payment in most cases by 6 months to 1 year and resume it when you are in the optimal condition by recovering the payments of the suspension period, if the impossibility is permanent, you can leave what you have set aside up to that moment to accrue until the moment of retirement or ask for early redemption with penalties where provided for in the contract.
The advice that I always leave in custody to my clients, which is the basis of a correct financial planning, is to combine a savings activity managed completely independently alongside a pension plan that is easily accessible and can be released at any time, therefore for example if an individual with a saving capacity of 200 Dollar per month is preferable for 120 to use them to set aside money for social security purposes and 80 to manage them as an independent source of savings, in such a way as to still have the necessary financial resources to face unexpected events, because the funds allocated to the retirement provision must absolutely not be taken into consideration for these reasons.
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