How to start saving for retirement?

Every Indonesian, irrespective of their profession and salary, always dreams of a peaceful, financially stable retirement life. But not all of them save for it. Research conducted by HSBC in 2018 found out that only a third of Indonesians set aside funds every month for their retirement. As per an ADB report, the Indonesian economy is on a growth trend, but the pension and retirement planning initiatives are still in a nascent stage. Almost 87% of the Indonesian population stated that they would still have to find alternative income sources after their retirement to maintain or uplift their standard of living, and 76% of them will be dependent on their children.

Why is it important to plan for retirement?

• Increase in life expectancy: The life expectancy in Indonesia is almost 72 years according to the 2021 Statista analysis. As of 2022, the retirement age for both men and women will be 58, which indicates that one should prepare to live for a long time after retirement, and hence having enough funds is crucial.
• To ease the sandwich generation stress factor: The sandwich generation is already burdened with the everyday lifestyle cost, the future of their children, and also the welfare of the family, including parents, expecting them to contribute everything is burdensome and also not logical.
• The Golden years of retirement: If planned and invested correctly, the retirement years don’t have to be about the alternate source of work and dependency on others. One can spend time with family, go for a holiday and enjoy hard-earned retirement.

What activities play a huge factor in the retirement plan?

• Buying the necessary insurances while one is employed. This saves unnecessary medical bills, emergency expenses and keeps one protected after retirement.
• Investment in mutual funds, stocks, and bonds. The quicker one starts investing, the more risks one can take with investments and prepare themselves for the future.
• Investing in a solid pension fund that starts paying every month after retirement till the day the pension holder is alive.
• Doing the necessary calculations in time is essential. Estimating future expenses, saving capacity, period, investment goals, future returns, and market scenario, make a lot of difference.

How to start saving and prioritize one’s retirement plan?

It is difficult to think of the future when the present has numerous needs, though it is not difficult to start a fund if one puts their mind to it. Generally, having one savings account is not enough as any small or big emergency can drain it out. A few better alternatives would be:

• Invest in an individual retirement account (IRA) where the money automatically gets deducted from one’s savings and accumulates over some time. It also has tax benefits.
• For any big expense or financial situation, apply for a loan instead of breaking your savings. While one is employed, the loan payment can be managed.
• Learn about your employer’s pension plan, coverage, and benefits. Check if your spouse is also covered.
• Invest in diverse financial instruments to minimize risk and improve the quantity of return. Don’t put all your savings in a mutual fund or don’t put everything in IRA. Create a portfolio of investments; take the help of a financial advisor if needed.

In the current times, it has become very important to take charge of one’s financial future. To understand financial security and retirement planning one should ask questions and gain knowledge from one’s employer, bank, union, or financial advisor.