Most Bulgarians do not have a strategy and plan for retirement and for life after work. Many of them do not know what pension they will receive and rely only on the state to take care of them, which is not a very good option. This was stated by the financial expert Teodor Minchev in the show Money.bg on Bulgaria On Air TV.
“Another common mistake is that almost everyone postpones the process of saving and investing for retirement, or it starts happening only five or ten years before retirement and so it is difficult to achieve the set goals. Last but not least, people are afraid to invest their savings, but at the same time risk inflation to eat them up “said Minchev.
How to improve our financial situation after retirement?
According to the expert, the main financial principle that the consultants recommend is “to pay yourself first” or when we receive a salary to set aside part of it in a special savings account and it is recommended that the amount be between 10-15% of income.
“The biggest friend of these savers is the so-called snowball effect, which allows funds to increase many times over time. On the other hand, the most dangerous for savers is inflation, which eats away at savings – for example, 3% annual inflation eats up savings in more than half for 24 years, “said the expert.
According to Minchev, everyone should decide for themselves what percentage of the income they should set aside to achieve their pension goals, but the earlier we start saving, the more possible it is to achieve a peaceful retirement.
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What is compound interest?
According to the expert, the complicated interest rate is interest on profits as well. “If we have BGN 100, we will set aside 10% next year, we will have BGN 110, but before the next one we will have another BGN 11. This way we get the complicated interest rate, and every next year I will receive more and more funds with a positive return, which helps us. money to work for us “.
Another important point is in which financial instruments the savings are kept. “They need to fit your risk profile – without taking the greater risk you can afford.”he said.
What are the options for investing in financial instruments?
According to the expert, everyone should assess the risks for themselves.
“It is not necessary to invest only in stocks. Real estate is also a popular option in our country, which historically has shown that it is growing at an inflation rate. It is good to have diversification, little risk-taking and to have a horizon view. “, said Minchev.
How much should you save for retirement at each age?
The best time to start is right away
Obstacles to savings
The biggest problem, according to the expert, is that there are always excuses for this not to happen. According to him, even if we have a small income, a small part of it can be set aside.
“Perhaps the biggest problem is that saving requires postponing current consumption at the expense of some future goals.”, he said.
Still, how much should we set aside?
Some experts advise that we should have saved eight salaries before retiring.
“If you worked for BGN 15,000 a year, the experts recommend that we set aside BGN 120,000 for retirement. Other rules are, for example, to replace 80% of your income in the form of a pension or if you worked for BGN 1,500 per month, when to retire you must have a monthly income of 1200 BGN “, Minchev added.
Mathematics for retirement
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