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Shares, bonds and life insurance: personal pension savings

It is absolutely real to provide a decent old age. Experts all over the world agree that the most important is to set a goal and start saving ahead of time, writes
Shares, bonds and life insurance: personal pension savings

We are used to seeing European retirees who, in their old age, do not stay at home, but travel around the world. The thought immediately pops up: "The pensions in Europe are so high, not like in our country". However, few people know that aged foreigners are often ones who should get all the credits for that, since they start saving long before retirement. In our country, according to various polls, they rarely save on retirement. The experts explain where to start and what tools to look at.

Getting started with insurance

All the experts insist on the importance of insurance. If your family directly depends on your earnings, it is very important to insure your own health and life. If something happens, your loved ones will not remain without means of support. But what does all this have to do with your future pension? Today, the insurance market is offering an interesting product, universal life insurance. It is a hybrid of a bank deposit and life and health insurance. You make regular contributions that accumulate, and you are insured for the entire program period, for instance, by your retirement.

You will not receive a large income here, but this is not the purpose of the universal life insurance.

"Universal life insurance is not about profitability, but about achieving your financial goals. By its profitability it can be compared to a bank deposit, you cannot gain much money on it. But it gives insurance coverage and allows achieve your goal no matter what troubles we get into, slowly but steadily. Therefore, it is important for future pensioners to start with endowment life and health insurance," says Vitaly Bagamanov, the Branch Director of the BCS Company in Kaliningrad.

Individual investment account: we are returning tax!

It is easier to save up for retirement, the more time remains before it. But how to save money, where to start and what to invest in? A good option for beginners is an individual investment account (IIA).

This is a special type of brokerage account that is opened for three years minimum and allows you to receive an annual tax deduction equal to your contribution to this account, but not more than 400 thousand rubles, says Natalia Smirnova, the CEO of “Personal Advisor”, a member of the group of experts on financial awareness of the Federal Service on financial markets.

"If you open IIA, the state will guarantee to return 13% of the amount invested into the account," notes Smirnova.

"This is a good start, we can contribute 400 thousand each year and return 13% of the tax, in rubles it is 52 thousand for the very fact of putting money on IIA. And you can place money from this account in various financial instruments and receive additional income," adds Bagamanov.

Let's say your monthly income is 40 thousand rubles. How much to save? You can start small: at least with 5-10% of income, the expert notes.

"4000 rubles from forty thousand a month on your IIA is about 50 thousand rubles a year, and we will additionally be able to return 13%, that is, more than 6000 per year. It means, we will earn this amount for the very fact of depositing funds into the account", says Bagamanov.

Shares, bonds or mutual funds?

IIS itself is not an object of investing money; it is just an account which we are contributing funds on. And then we can dispose of them at our discretion. For example, buy shares, bonds or use other investment tools. Then the capital will not only accumulate, but also multiply.

"If you are not ready to unravel the shares, the simplest option that I would recommend is mutual funds, they are quite numerous, and at the initial stage I would recommend investing in mutual funds of shares. They will have an average annual yield of 15 -20%. This is not even a bold assumption, but their normal profitability," says Bagamanov.

You can choose a conservative, moderate or aggressive investment strategy.

"Ready to risk, then choose an aggressive strategy in the management company, or create an aggressive portfolio of shares or ETF stock funds (exchange-traded funds, that is, exchange funds that are bought and sold on the exchange)," advises Smirnova.

If you are not ready for risk, choose a conservative management strategy. For example, government bonds (FLB), corporate bonds of the largest companies and ETF bonds. A moderate strategy is, for example, 50% of the shares (and ETF shares) and 50% of ETF bonds and bonds.

But there is an important rule: the closer to a pension, the less in your portfolio should be occupied by tools with a high risk share. Ideally, the share of risk-free instruments, such as deposits or bonds, should form 100%, Bagamanov says. But if it is still a long way to retirement, you can afford to take risks within reasonable limits.

Saving in the right currency

If you decide to save money on a regular deposit, choose the correct currency for savings. In Russia, they have become accustomed to the inviolability of US dollar, and many prefer to buy it. But there is another universal rule of long-term savings: it is better to save in currency you are going to spend your savings. If you have a golden dream of living on the Cote d'Azur when you retire, it makes sense to save in euros. If you see the Baltic coast in dreams, you can save money in rubles, notes Bagamanov.

Whichever instrument you choose, remember: if you want to live with comfort in old age, think about it long before it.


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