3 Steps Towards a Prosperous Retirement with Insurance

Queenews.com- Recently the term ‘sandwich’ generation is commonly used to describe people who have to be responsible for the generations above and below them.

During productive times, they have to bear the living expenses of their parents and children at the same time.

So, you don’t want your beloved children and grandchildren to suffer the same fate, do you? One way to break the chain is to make retirement preparations as early and as well as possible.

For those of you who are married but are still far from retirement age, it’s only natural that you haven’t thought much about what to prepare for old age.

But don’t wait until the children have grown up and live with their respective families. If at this stage you don’t have the provisions, it’s possible that your next generation will also be stuck as a sandwich generation.

Apart from that, for yourself, retirement preparation can also bring invaluable benefits later.

Based on the American Psychological Association (APA), quoted by Verywell Mind, as many as 72% of adults worry about finances, and that can be a psychological burden for you. The less burden on your mind, the smaller the health risks that come with old age.

Not to mention, planning early also gives a clearer picture of your financial and career decisions.

For example, entering a retirement preparation period, you can start considering the amount of savings needed when planning your daily spending budget.

So, if your question is ‘when is the right time to prepare for retirement?’, the answer is as soon as possible. But how do you get started and what are the things to pay attention to? Check out the tips below!

1.Calculating Pension Fund Needs

Pension funds are clearly the first thing to pay attention to. Where you work may already have a retirement plan, especially if you have a career in a state-owned company or in the government. But the funds from these programs are usually insufficient, especially if you want to leave a valuable legacy for the next generation. Then how much funds should you set aside during productive times?

For example, if you want to retire at the age of 55 and assume the average life expectancy of Indonesians is 75 years, one must prepare funds for 20 years of living expenses.

With this assumption, let’s say you are currently 30 years old and need living expenses of IDR 5 million per month, meaning you have to pocket IDR 60 million per year or IDR 1.8 billion for 20 years, without calculating inflation. If you calculate 5% inflation, this IDR 60 million figure will exceed IDR 500 million at the start of your retirement, assuming the same lifestyle. Pretty big number, right?

2.Start Saving and Investing

Because the amount of retirement funds needed is quite large, it is better to start saving at your productive age. Even though they have set aside 8 percent of their salary for JHT BPJS Employment and DPLK products, this amount is considered not enough to guarantee old age. It would be better if you set aside 15-20 percent of your total income for retirement.

The percentages recommended coincide with the popular 50/30/20 budgeting method, where you divide your spending into 50% needs, 30% wants, and 20% savings. So, you can depart from this method as a basic benchmark and adjust the details according to your current condition. Start reducing unnecessary expenses, and encourage saving.

Savings alone will not be enough to meet the required funds. Ideally, you also own investments. You can consider investing early, starting with minimal risk investments such as government bonds or deposits.

For example, investment starts at the age of 30 with an investment of 12% of income, with a return of 10% per year. If you earn IDR 20 million so you save IDR 2.5 million in the Financial Institution Pension Fund (DPLK), you will get IDR 3.1 billion when you retire. If the funds are then put into bonds or deposits, you will get IDR 16-22 million per month, equivalent to your current salary, after retirement.

Employees who have set aside part of their salary for BPJS Employment or DPLK only need to add it up to an even 12%. Then, this strategy can be adjusted with age. For example, in their 30s they mostly took the form of stocks or stock mutual funds, in their 40s in fixed income mutual funds or government bonds, and in their 55s it was entirely in the form of money market mutual funds or deposits as previously described.

3.Have Insurance for Pension Fund Protection

Everyone certainly wants to enjoy a prosperous retirement with their beloved partner or family. But be aware that every plan has risks. If there is a risk of dying before retirement, the spouse left behind can lose the expected retirement funds. That’s why it’s important to have insurance that can both develop and protect your retirement fund in old age.

You can try old age protection products from Manulife Indonesia such as MiFuture Income Protector (MiFIP). This product provides certainty for Dana Mapan in old age and a fixed income every year of up to 600% of Dana Mapan. In addition, MiFIP also has protection from the risk of death and accidents of up to 100 percent from Dana Mapan. Just contact our Life Planner now for more information.

Retirement preparations are indeed easy to put aside given the ever-increasing daily needs. However, let’s start preparing as early as possible for the sake of our own peace in the future and also the future of our family and our beloved children and grandchildren.

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