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 ETF CEDEARs combined with individual or corporate retirement plans are the most recommended in this context of high volatility.
Who does not want 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.
The good news is that it is possible. The bad thing is that if you don’t start planning from a young age, there may be desire, but resources will be scarce. 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 suppose at that age one manages to understand the relationship between saving by postponing consumption versus consuming now. In that case, they are the objectives for which I do it. Among begin to outline 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.
“Anyway, many people address the issue after age 40 because, before that, they dedicated themselves to traveling, studying, and starting a family, among others. And it’s not bad, and it’s not too late to do it. Only that it will involve investing in a different way than if you are 20 years old. The phrase that closes this issue is that the best time to address financial planning is today and now,” says Dyszel.
You should first design an action plan whenever you know this need. 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 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.
Three tools can be used and combined with 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
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 85.
Starting 10 years later requires approximately double the monthly capital contribution for the identical computation.
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, which 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 practicing. “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. 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.”
IOL Invertironline research head Maximiliano Donzelli advises investing every dollar or peso saved and basing the S&P 500 ETF on the concept.
If we use the index’s average performance, a 36-year-old who saves $1,380 a year, or $115 every month, and puts it in the SPY CEDEAR will have saved close to $113,900 by 65.
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.
“A good alternative would be to invest in the CEDEAR of the Standard & Poors 500 (SPY) and during the first part of the investment plan for retirement, also to have a more open position to risk, for example, through the CEDEAR of the QQQ, the ETF that replicates the Nasdaq 100 technology index and that has twice the average return of the S&P500. Add a portion of fixed income to the strategy through negotiable obligations (ON).
OTNs issued by solid corporations in their industry with returns similar to U.S. inflation and minimal risk, such as Capex (CAC2D) and Vista Oil & Gas (VSC3D), are preferred by conservative and moderate investors.
“”Finally,” says Donzelli, “the investor should have 10% of his portfolio ready to invest in assets that may give short-term opportunities.”
Hence, they can invest that capital in shares or ETFs that copy economic sectors, 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. On the other hand, do it with a long-term strategy and thoroughly evaluate the assumed risks.
Mateo Sarsur, Balanz’s Chief Sales Trader, says, “A historical sequence of over 100 years comparing the performance of the major asset classes versus US inflation underlines the necessity of keeping invested as whatever the asset, the yield is larger than dollar inflation.”
Sarsur’s first recommendation when delineating the portfolio is to do it in hard currency. “At the local level, for this type of investor, we always recommend planning in dollars since our country’s inflationary and macroeconomic cycles make it difficult to project beyond the medium term.” And he adds: “This can be a good time to put together long-term strategies, taking advantage of the opportunities left by the market correction of recent months, and to add coverage, we can add some commodities,” says the specialist, thinking about a 20-year portfolio.
Maximiliano Donzelli, head of research at IOL Invertironline, advises investors to have 10% of their portfolio ready to invest in assets that may offer short-term possibilities.
Santiago Abdala, director of PPI, advises investing 60 to 70% of money in fixed income (depending on risk tolerance) and 40 or 30% in equity instruments (shares): “Savers and income diversifiers can weigh shares more.
Until the Fed normalizes interest rates, it’s good to generate some rate.”
SBS’s Haro points to a tool that can simplify some steps for the investor.
“Our CEDEARs Managed Account lets us gain exposure to North American and other markets with active management businesses without rebalancing the portfolio.”
“Our portfolio skewed towards valuable shares such as those of energy firms as they not only enable an excellent dividend (now at 4 percent) but will also continue to be the quickest rising in the future quarters by the substantial growth in the price of oil,” he says.
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 fund’s administration in the hands of experts.
Life insurance is ideal, especially for people with children.
If we live a lot and don’t have adequate resources, our quality of life will suffer; if we live little and don’t establish a financial cushion, our children won’t get the education or life we want for them. 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,” says Guillermo Pellerano, general manager of San Cristóbal Retiro. “It becomes a fundamental tool to compensate for the or through a single payment of the total,” he adds.
A retirement insurance policy should not be missing from any action plan because 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 permissible. However, existing exchange restrictions convert premiums and profits to pesos using a publicly published conversion rate, such as Banco Nación’s seller exchange rate. Hence, regardless of other economic values, the account evolves with this type of trading, “executive argues.
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 it’s a way to start a “free” long-term fund for the youngest.
Pellerano recommends “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.”
On D-Day
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.
“This rule,” Haro explains, “was designed in 1994 by Bill Bengen and consisted of two central pillars. It recommends spending 4% of savings in the first year of retirement and adjusting it annually 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 technique would have prevented retirees from running out of money every 30-year period since 1926, even in the worst economic conditions. That is, it is a really robust method we can leverage,” says Haro.
“It is recommended to minimize the volatility and risk of the investment portfolio by increasing fixed income and decreasing equities,” Sarsur writes from Balanz.
This generates more accurate flows and compensates for lost income.”
The retiree may have a monthly withdrawal number in his investment account if he completed his study.
“If a person starts with $10,000, saves $5,000 a year, and invests that money at 5% a year for 40 years before retirement, he will have almost $700,000, which is an income of almost $3,000 per month for 20 years if he stops investing today,” says Sarsur.
