Is private pension the best option for retirement?

Everyone wants to ensure a more peaceful future, but it’s important to analyze all possibilities to make the best possible decision. Let’s talk about private pension?

When we talk about personal finances, it is inevitable to think of ways to guarantee a more peaceful and headache-free future with money. As much as it seems a distant topic, the truth is that starting to plan your retirement early will help you achieve better results up front.

Despite the importance of this subject, it is still common for people to be confused about what is the best investment option for a retirement aligned with their goals. Although private pension plans are a popular option in this regard, there are many factors that must be considered when making this decision, and this varies according to each person’s situation.

Unfortunately, I won’t be able to give you a definitive answer on whether or not social security is the best of all options for your retirement, but in this text I’m going to talk a little more about this financial product and also about what you should consider to know what it is. the best option for your own context.

Private pension costs

When you decide to join a private pension plan, you should know that within that plan there is an investment fund with its particularities. When going down this path, there are three costs and fees that need to be analyzed in order for you to make an informed choice.

The first of these costs is the so-called administration fee . This is the rate of the financial product, the fund of your private retirement plan. You won’t be able to avoid this fee in any private pension plan – it will always be present – ​​but don’t see it as a problem or injustice of the plan. The fee exists because, on the other side of the investment, there are people working to manage the investment fund and make decisions that guarantee the profitability of the product, and this work needs to be remunerated.

The second cost is known in the market as the loading fee or entry fee . This is a fee defined by the pension plan, that is, it is not mandatory and may or may not be charged by the plan you choose. It is applied to your money when you make a financial deposit in your plan, eating part of the invested money.

For example, if you invest $100 monthly in a plan with a 5% load rate, that means only $95 of the money actually goes into the fund. Remembering: this fee is not mandatory. Although some banks charge very high fees (such as 8% or 9%), there are private pension plans where this fee is not even charged.

The third cost to consider is the exit fee . Just as the previous rate eats part of your money upon entry, this one will apply when you redeem your money, deducting a percentage from the amount you are withdrawing from the fund. The good news is that this fee is also non-binding and, like the entrance fee, it can also be zeroed.

It is very important that you study and fully understand the contract for the pension plans you are reviewing. Although the last two fees mentioned are not mandatory and there are options that do not cover either, there are also plans that will apply both to the money you are investing.

Pension plans are linked to contracts called SUSEP (the acronym means Superintendence of Private Insurance), and in this document you can check all the information explained above to really understand the conditions of each plan. Make sure you have all this information so that you can understand whether or not a particular private pension plan is a good option for what you are looking for.

Private pension benefits

I just talked about three costs involved in a pension plan, but don’t worry, there are also positives. Now I will present three benefits that I find very interesting in this type of investment.

The first benefit of private pension plans is that they offer portability . Just like cell phone plans, for example, you can also migrate your pension if you discover that the current plan is bad or you have found a better option.

With portability, you can make this migration without having to withdraw all the money invested, which would end up incurring taxes and fees, and so you can simply change the plan without major worries.

The second benefit is a bit morbid but must be considered: private pension plans are the only type of investment in Pak that do not enter your probate in case of death .

This means that you can elect anyone you want (it doesn’t even have to be a family member, it’s literally anyone) to become your beneficiary and start receiving money from your private pension if something happens to you.

For other types of investment, what happens is that all the money is redeemed and separated according to all the inventory and rules involved in the process. This possibility of private pension allows you to have more control over this succession plan, something interesting for anyone who is concerned about a dependent or something like that.

The third benefit that I think is important to highlight is that pension plans offer the possibility of defining recurring redemptions and investments over time. With this facility, you can not only program a monthly application without having to worry about doing TED or anything like that every month, but also define that you want to have some kind of income after a certain period.

So your plan starts to return you a monthly redemption based on the money invested, a facility that is not offered by other types of investment and helps you to make a plan to have the security of that “salary” in the future.