Aspects to consider before you retire

In the 21st century, life expectancy has reached levels that would have been unimaginable just a few decades ago. This means that many people live a long time after retirement, so it's crucial to carefully consider what your financial situation will be when you stop working and explore ways to improve it.

The most important thing to do before retirement is to plan well in advance. Starting to plan just a few years before you retire leaves little room to maneuver. You might find that it's too late to take the necessary steps, or you could end up having to make a significant effort to save in a very short period of time.

Make a plan

The first step is to decide what kind of life you want to lead once you retire. If you’re envisioning a quiet life, maintaining routines or staying close to family without leaving your usual environment, a normal pension could almost fully cover your needs. However, if you’re planning on taking trips or buying a home in a dream location to live out your retirement years, you should make a long-term savings plan and invest wisely to accumulate the necessary capital.

The next important step is calculating the retirement pension you’ll receive after your working life. With this information, you can estimate how much money you’ll need to maintain your desired standard of living and assess the gap between your expected pension and what you actually need. The result, multiplied by your years of life expectancy after retirement, will be the amount of capital you need to accumulate while working.

Considering the two aspects above, the most immediate conclusion is that you need to start saving as soon as possible. The more years you save, the greater the accumulated capital, and when invested, your savings will also generate returns, further increasing your overall wealth.

Move from savings to investment

Once you've decided to save long-term, the next step is to invest—but not just any investment. It's advisable to create an investment strategy, keeping in mind that the longer you have until retirement, the more risk you can afford to take with your investments. In addition to starting as young as possible, we recommend establishing regular savings habits. Making contributions on a monthly basis, for example, can help offset the potential negative effects of market volatility.

There are specific financial products designed to help plan retirement savings. The best known are pension funds, but there are also other options, such as Systematic Individual Savings Plans, mutual funds, or unit-linked products.

Some investment products follow a more conservative investment philosophy, offering lower returns with less risk. Others carry higher risks but are generally more profitable. Typically, the former are more suitable for individuals nearing retirement age, while the latter tend to be better for younger people with a longer savings horizon.

To determine the best strategy for your situation, we recommend seeking advice from a professional who specializes in long-term savings products and financial planning. In addition to its hundreds of insurance offices, MAPFRE also provides, through MAPFRE Gestión Patrimonial, the services of over 200 financial agents and wealth planners. These professionals assist customers in selecting the best investment solutions tailored to their individual financial needs.

Focus on the long term

Once you've selected an investment strategy, it’s important to stay committed to it with a long-term perspective, not being influenced by the frequent market fluctuations that can cause panic among investors, leading to rash decisions. While it's important to periodically review your strategy if there are changes in your personal or financial situation, any adjustments should be made carefully and with proper advice.

The taxation of the chosen product is just as important as the returns obtained. Depending on each country’s regulations, a product may offer tax deductions when money is initially contributed, providing short-term tax advantages.

Other financial or insurance instruments may offer tax deductions when the accumulated capital is recovered, which means postponing tax breaks until after retirement, often the most recommended option. Moreover, tax treatment can differ depending on whether the savings are withdrawn as a lump sum or in the form of a monthly income. All these aspects can significantly impact the final result.