Investing for retirement should be a priority for all people of working age. It may seem a distant subject, but anticipating risks can become the ally you need to have a strong financial support.
After the situation that arose worldwide during 2020 – due to the Covid 19 pandemic – affecting the world economy, many people made the decision to protect their money and secure their retirement savings with investments that provide them with additional earnings.
By 2025, CONDUSEF estimates that 50% of the country’s workforce will be made up of new generations. The problem with this is that many of the jobs would not guarantee financial security in the future. Therefore, the most recommended by specialists is to start planning from today.
This is how investing in Blue World City can play a strategic role in your life and retirement plan, no matter how far away it may seem. In this article we will talk about how to grow your retirement savings with safe investments that guarantee a medium and long-term performance.
Retirement Savings Investing What is it?
To begin with, we must clarify that saving and investment are not synonymous, and we make this mention because most people tend to confuse these terms or consider them as the same.
We talk about investing when you pay for a good or financial asset that will provide a profit in the future. It is not a savings, much less an expense, because you do not give up money, but technically you put it to work to generate profits.
Now, by saving can be understood as safeguarding a certain amount of money from time to time, without carrying out any action other than saving it.
To give an example, if a person acquires a telephone, this is an expense, and it will continue to be so even if he sells it after a while, because this class of objects lose their value.
The devaluation of certain objects or goods is something common and inevitable, the same happens in the case of automobiles, which since they leave the agency lose value. An exception to this and one that is very beneficial to invest is land or investment lots, especially if they are in a commercial area thanks to its benefits.
Investing must provide a profit either in the short or long term without chance or luck involved.
So, what is a retirement savings investment? Explained in a simple way, we can say that it is about putting to work the money that you have destined for your retirement, and in this way make it grow.
Taking into account the above, we must understand that investment is governed by three fundamental factors:
- Performance (what we earn).
- The risk (what could be lost).
- The term (the time in which we see the benefits).
These three points must be taken into account before deciding what to invest in, and carefully analyze the available options before choosing the one that will increase our capital according to what is best for us.
In addition, the ability to assume low or high risk must also be taken into account, as well as the flexibility of the investor in terms of the time available to see the profits reflected.
For example, if you are close to retirement, you may want to invest in something that generates short-term profits, as opposed to if you are starting your working life and have enough time to grow your investment.
If you want to know in more detail the risk factors of an investment, we invite you to read the article that we have prepared for you.
Why is it important to invest for retirement?
According to information from CONDUSEF and the result of a survey carried out among young people between 18 and 30 years old, it was discovered that on average the individual distributes their income as follows:
- 34.1% to food, beverages and tobacco.
- 18.8% to transportation.
- 14% to educational services.
- 33.1% in miscellaneous expenses.
In addition, it was concluded that 54% of these young people make purchases that are out of their budget, at least once a month. How familiar are these expenses? It may be a good time to organize your personal finances.
In an age of high consumerism, “trends” are often the main reason for excessive spending by young people in an attempt to maintain a lifestyle that is sometimes out of reach of their pockets, and this precludes their opportunities to save for the future.
It is estimated that a person of retirement age —65 years in Mexico— will need between 70% and 80% of the income they obtained before they stopped working. Many of those who are about to retire may have been able to acquire savings over time, but now they fear that their capital will not be enough.
On the other hand, those who see the time to retire far away continue to think about how to generate enough money to avoid reaching adulthood without enough money and going through necessities.
Investing is an activity that everyone should do so that the money they earn today will not lose its value tomorrow.
Gone are the days when you could save cash and place it under the mattress, this because money always loses value due to inflation.
Currently there are countless financial institutions that offer a tax benefit through a retirement savings system; however, inflation continues to be a risk factor. The money you have today may be worth less in a few years.
The Retirement Fund Administrators are financial institutions (AFORES) whose functions are regulated by the CONSAR (National Commission of the Retirement Savings System); however, they do not provide additional returns that increase the amount of your capital.
What can I invest in?
Now you wonder what kind of investments you can make with your retirement savings to grow your money and guarantee its value regardless of the passage of time.
If you are a worker, you have the possibility of accessing private plans that according to CONSAR are voluntary savings schemes, usually established by the employer, that seek to grant a retirement, however, this may be insufficient to maintain a style of relaxed life in the retirement years.
However, the investment options are many, some may even seem like expenses at first glance (like when we pay for a course or language classes, we actually invest in our profile that will help us position ourselves in a better position).
Among the main most recurring investment options are:
1. Investment funds
It is an investment mechanism by a company (bank, brokerage house or other entity) that brings together a group of people to invest their savings together, and thus they can access better opportunities.
This investment fund is made up of a basket that includes stocks with variable income and fixed income bonds, and has a privacy notice.
One of the main disadvantages as an investor is that you will not know what the fund contains and the process is confusing for both young people and adults, so you must inform yourself beforehand.
The risks of this type of investment in the financial market are variable, they depend on the type of fund to which your capital is destined, and they are not tax deductible, what does this mean? For example, if you acquire an investment fund type ¨A¨, the returns will be stable and constant but the discount for ISR will also be.
In addition, you must be patient since the results of your investment will be reflected in the long term. For this reason, if you are close to retirement, you may want to invest in something more immediate.
2. Government bonds (Cetes)
They are debt financial instruments, similar to a promissory note. The federal government is the one who issues them and undertakes to pay that money in a defined period and with returns. In this case, your investment will be directed to Government securities without the intermediation of banks, brokerage houses or other institutions.
In order to invest you must be of legal age, be Mexican and have a fixed account. You can invest from 100 pesos without charging commissions. These have a maximum term of one year and a higher yield than savings accounts, checks, time deposits or promissory notes.
As a bonus, government bonds are auctioned every Thursday, something that you should consider in your investment strategy if you are interested in this method.
3. Real estate
One of the best investments that can be made; When you invest in real estate, you get huge benefits compared to other options, since it generates capital appreciation and an accelerated return on investment (ROI) – depending on the area you choose – and you will have the security of building a wealth for life.
As time goes by, you will recover the investment, whether you use the property to live or as a business; in this way you get the financial stability you require for your retirement.
Why do we say that it is a safe investment? Contrary to what we mentioned at the beginning about cell phones or cars, real estate does not decrease in value, but increases and protects your investment.
In addition, there are many business ideas to make money with land, and even without generating income without investing too much.
This last option is undoubtedly one of the best, mainly for the new generations, because it allows them to acquire a property with affordable payments.
Investing in a piece of land in the Mexican southeast brings with it a favorable return for your economy, and you will be sure that the capital gain of your assets will increase considerably over time, especially if you opt for growing cities.
How to invest safely?
If you are close to retirement, investing your savings in real estate can bring the security and financial stability necessary for that stage of life.
If, on the other hand, you are a person who is starting a career in productive life, it is never too early to start.
The land and lots of investment are the best option for retirement because you get the opportunity to acquire assets at low prices without the risk of loss that others have options because the land almost never lowers its value.
Unlike a conventional retirement plan that will take you too many years, you can buy land and pay the total payment in more comfortable installments, and from there start building the type of property that you decide, either to turn it into a home, in a future business, or both.
The secret is to contact the correct real estate company – such as BMF Inversions – that will provide you with the appropriate advice and guarantee your investment. An example of this is opting for companies that have market research.
There are many companies in the market, you can even buy land easily online, we invite you to visit the article that we have prepared with all the information.
Every good decision starts with saving and when it comes time to invest, advice is important to know the most viable options according to the investor profile and the type of project.
Land, the best way to invest your savings
Whether you choose to invest in mutual funds, government cetes or real estate, this last option is the one that provides you the most benefits, why? In addition to the fact that your retirement savings are safe, you can make additional use of the property and generate extra income, in addition to building an equity for the future.