How to cope financially with the retirement stage? The truth is that there is no magic formula for plan the rescue of accumulated savingsSince it all depends on factors such as available assets, income level, or personal and family circumstances. However, there are a number of factors, both objective and subjective or psychological, that have a positive influence.
Once in retirement, income usually drops as a result of having stopped working, being lower public pension that is received at the salary previously obtained during working life. To this is added that usually only available two sources of income: the public pension and the savings that have been generated until then, either through financial products, such as funds, pension plans or current accounts, or non-financial products, such as real estate.
"There are as many forms as there are types of person and situations in which they find themselves", answer the experts from the BBVA Pension Institute on how to use savings once retired. However, they indicate four facts that must be taken into account. One is the existence or not of children or other descendants who are wanted leave an inheritance in the future or those who want to help financially, such as paying for studies, helping with professional projects or their emancipation. Another is the age of the children and their situation of emancipation or economic dependence, as well as if there are other dependents to take care of or for which third parties are paid for their care.
To these two factors is added a third, the state of health with which retirement is reached and how it evolves during it. A robust health encourages the spirit, the activity, the consumption, with which one has a higher spending, but also a delicate state of health may require dependency and health care, residences, and other extra expenses above the level of protection that the State provides, they explain.
Finally, they highlight the degree of personal risk aversion of each individual, already low by having a shorter estimated life time horizon than during the active stage. Here we must put in the balance how important is the economic tranquility and the absence of shocks on our savings, which, although it is greater the older we get, is different between people of the same age, and how much it weighs optimize investmentss according to my estimated time horizon of life. This personal aversion to risk, in addition to age, will be determined by other factors, such as past experiences both financially and otherwise, our character, our education, instilled principles and beliefs, influence both at the family level. as well as our environment, even by our own genetic inheritance.
EXPENDITURE IN THE FORM OF 'U'
Expenditure during retirement is usually represented in many countries in the shape of a 'U', although in Spain, that 'U' is partially flattened in its final part due to the state intervention. Why is it associated with this letter? The explanation is that during the first stage of retirement, spending falls with respect to the active stage, not only because of lower income, but also because of a decrease or disappearance of many of the expenses essential and discretionary expenses. Furthermore, some services are paid for or partially subsidized by the State. But it rises from an age, around 80 years, due to higher spending on dependency and health.
Here, the experts consider it appropriate to plan well the level of expenditure that will be incurred when we can no longer use ourselves or health begins to progressively and significantly deteriorate, although we do not eventually reach that situation. Therefore, they believe it is convenient to answer questions such as what type of residence will I want and how much does it cost, if I want and can pay more for a better quality of care, if I will need a caregiver and how much it will cost me, if the pension will be enough to pay that expense or will I need to resort to savings.