Choices for retirement income investment

How to invest today to retire with a retirement fund of up to $300,000: You only need $250 per month.

With a good investment strategy and 20 or 30 years of contributions, building a retirement fund of $250,000 or $300,000 requires less than $250 per month. The most recommended in this context of high volatility are the ETF CEDEARs combined with individual or corporate retirement plans.

Who does not have the desire to reach 55 or 60 with total financial freedom, with the possibility of giving a 180-degree turn to the work activity and adding more hours of enjoyment and less full-time work? From doing a soft landing until reaching the time of proper retirement, it is said that the law in Argentina marks the 60s for women and 65 for men, and that reality stretches many times beyond those limits, out of pure necessity or because the professional vein is also a joy if it can be in balance with other desires and plans.Choices for retirement income investment 

The good news is that it is possible. The bad thing is that, if you don’t start planning from a very young age, there may be desire, but resources will be scarce. Well, money doesn’t buy happiness, but it makes it easier to get close to it.

“It is important to start getting involved with the issue of savings and investments at an early age. Clearly, at twenty, we still feel immortal. But if at that age one manages to understand the relationship between saving by postponing consumption versus consuming now, they begin to outline the objectives for which I do it, and among others, in the very long term, it is retirement,” says Diego Dyszel, professor of the Focused Program of Personal Finance at the IAE Business School of the Universidad Austral.

Whenever you become aware of this need, the first thing you should do is design an action plan. Pablo Haro, manager of personal finance and distribution at Grupo SBS, warns that “the most important thing is to have good planning that contemplates various scenarios in order to have greater protection from the unpredictable.”

“The best time to address financial planning is today and now,” says Diego Dyszel, professor of the Focused Personal Finance Program at the IAE Business School.

There are, basically, three tools that can be used and combined to have a financially calm retirement. Well-diversified savings and investments, from financial assets to real estate or shares in companies; individual retirement insurance and corporate retirement plans.Choices for retirement income investment 

Multiplying is possible.

“Due to compound interest, both the time factor and the constancy in the periodicity of contributions have a substantive impact on the ability to accumulate long-term wealth,” says Tomás Ruiz Palacios, strategy analyst at Consultatio Financial Services. If you start saving $250 per month at a real rate of 4 percent (years) at 29, you can withdraw $1000 per month until you’re 85.
Starting 10 years later, the monthly capital contribution is almost double.

Ruiz Palacios double-clicks on equities to put together a long-term strategy. “In his book Stocks for the Long Run, Jeremy Siegel calculated the real average return of the American market, and this was 6.6 percent on an analysis horizon from 1802 to 2012. This yield is almost double that of long Treasury bonds (3.6 percent),” postulates the Consultatio analyst before going to practice. “While it is true that stocks lead to greater volatility, the long term plays in our favor. In addition, if the entry point is reasonable, the volatility should be limited, and today the estimated price/earnings metric for the next 12 months is close to 15, while in the last five years it averaged a value of 18.”

Specialists recommend allocating 60-70% to fixed income and the rest to equity assets.

He recommends for the retirement fund the ETF CEDEARs, combined with fixed income. “Diversification is a prudent strategy that demonstrates a lot of moderation and, at the same time, can significantly help us protect our savings against market ups and downs and reduce volatility.”

If at the age of 29 you start to save at the rate of $250 per month at a real rate of 4 percent, at the age of 65 you can make monthly withdrawals of $1000 up to the age of 85.

Hence, they can invest that capital in shares or ETFs that copy parts of the economy, such as the XLF, which replicates the North American financial sector, the XLE, which replicates US energy businesses, or the EEM, which is a reference for investing in emerging economies.”

The analysts consulted absolutely agree in emphasizing that, despite being in a local and international context of high volatility, with inflation in the main economies of the world and a war conflict that further complicates the scenario, not investing should not be an option. Yes, on the other hand, do it with a long-term strategy and thoroughly evaluate the risks that are assumed.

Three recommended tools: investments, individual retirement insurance and corporate retirement plans

“A historical series of almost 100 years comparing the performance of the different asset classes against inflation in the United States demonstrates the importance of staying invested since whatever the asset, the yield is higher than dollar inflation,” explains Mateo Sarsur, Head Sales Trader at Balanz.

Sarsur advises portfolio delineation in hard cash.
“At the local level, we usually propose budgeting in dollars for this sort of investor as our country’s inflationary and macroeconomic cycles make it impossible to project beyond the medium term.”
“Now can be a good opportunity to put together long-term plans, taking advantage of the chances left by the market correction of recent months, and to provide coverage, we can add some commodities,” says the specialist, thinking about a 20-year portfolio.

“It would be ideal for the investor to have 10 percent of his portfolio available and ready to invest in assets that, at some point, may present opportunities in the short term,” says Maximiliano Donzelli, head of research at IOL Invertironline.

Santiago Abdala, director of PPI, emphasizes that the most advisable and usual thing is to make a distribution of assets that contemplates 60 to 70 percent fixed income (depending on risk tolerance) and 40 or 30 percent in equity instruments (shares) of the capital that is invested: “Those who have greater capacity for savings and income diversification will be able to weigh the shares more. At this time, where interest rates are lower than U.S. inflation, it is smart to generate some rate in the short term until the Fed’s interest rates are normalized.”

SBS’s Haro points to a tool that can simplify some steps for the investor. “We have an exclusive product called the CEDEARs Managed Account that allows us to obtain exposure to North American and other markets with active management stocks so that the investor does not need to worry about the rebalancing of the portfolio.” And he mentions: “In the current context, our portfolio leaned towards valuable shares such as those of energy companies since they not only allow an attractive dividend (currently at levels of 4 percent) but will also continue to be the fastest growing in the coming quarters by virtue of the strong increase in the price of oil.”

Secure contribution

Another key tool is insurance. A retirement insurance policy should not be missing from the action plan. The first reason is very practical: contributions can be made by automatic debit, by the forgetful, or by people who find it difficult to commit to the habit of saving. The second has to do with diversification and leaving the administration of the fund in the hands of experts.

How can we ensure our retirement capital reaches us?
“Fortunately, we have the ‘4 percent rule,’ which is extremely popular in the U.S., and it is very helpful to start putting together our plans,” says Pablo Haro, Manager of Personal Finance and Distribution at SBS Group. It is in the latter case that life insurance plays a key role.

“Retirement insurance is a medium- and long-term savings instrument whose objective is to help people consolidate a fund that, at the time of retirement, either by accessing retirement or by a decision of its own, allows to have a periodic income that covers their current expenses,” explains Guillermo Pellerano, general manager of San Cristóbal Retiro, and adds that it becomes a fundamental tool to compensate for the or through a single payment of the total,” explains the executive.Choices for retirement income investment 

A retirement insurance policy should not be missing from any action plan for two reasons: it is practical and diversified.

The currency in which retirees save and receive funds is always a consideration.
AVIRA’s 2nd vice president, Fabián Hilsenrat, is overwhelming:
“Foreign-currency contracts are allowed.
The existing exchange regulations convert premiums and earnings to pesos using a publicly published exchange rate, such as Banco Nación’s seller exchange rate.
So, regardless of other economic values, the account evolves with this type of exchange, “the executive Choices for retirement income investment 

An incentive to take out this type of insurance is that the contributions are deductible from your income tax. For 2022, the limit is $24,000. It’s not much, but for the youngest, it’s a way to start a “free” long-term fund.

Pellerano’s recommendation is to “start by reserving a figure that does not compromise current expenses; it can be between five and 10 percent of the usual income. In that way, we support the habit of saving and let time and profitability do their jobs.”Choices for retirement income investment 

On D-Day

How can we make sure our retirement savings reach us?
“Fortunately, we have a regulation called the ‘4 percent rule,’ which is quite popular in the U.S., and that is really helpful to start putting together our plans,” explains Pablo Haro, Manager of Personal Finance and Distribution at SBS Group. ices for retirement income investment 

Not investing is not an option, but you have to do it with a long-term strategy.

“”Bill Bengen created this rule in 1994 with two central pillars,” Haro says.
It recommends spending 4% of savings in the first year of retirement and then adjusting it for inflation.
He advises investing the retirement money (known in the US as the “nest egg”) in 55% American shares and the rest in low-risk dollar bonds.
Bengen found that this strategy would have kept pensioners from running out of money in every 30-year period since 1926, even in the worst economic conditions.
It’s a robust strategy we can use, “Haro explains.
Choice s for retirement income investment 

Sarsur offers Balanz’s “In the final stage of activity and retirement contributions, with human capital (potential future income per activity) low and financial capital close to maximums, it is recommended to lower the volatility and risk of the investment portfolio by increasing fixed income and decreasing shares.
So, we generate more accurate flows and make up for the extra money we’ll lose when we stop working.”

If the future retiree did his homework well, he could have a number in his investment account that allows him to make monthly withdrawals without any worry.

The original version of this note was published in issue 343 of Apertura magazine.

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