The classic reasons for having a retirement plan are well known: they are specifically designed to save for retirement, they offer unbeatable tax conditions in case of contribution – they reduce the tax base – and the future of the public pension system will make it more and more necessary to supplement.
But there are other reasons, less often mentioned, that will also benefit anyone who has a pension plan. Do you want to know more about these perks? This is exactly what we are going to uncover in today’s article. Read on.
You Contribute What You Want, When and Where You Prefer
Pension plans are the best products really designed to plan savings for retirement, since they allow periodic monthly contributions. Plus, you are also able to increase them at any time, decrease or freeze them, make extraordinary contributions, change the managing entity without having any management or tax costs.
It Can Be Considered As an Additional Monthly Expense
A practical advice for saving for retirement with less effort, is to set aside part of our income when we receive our paycheck each month and not wait until the end of the month to contribute to the pension plan. In other words, the formula would not be to subtract monthly expenses from salary income and then see what I have left to save. Instead, what we should do is deduct retirement savings directly from our income and use the rest for expenses.
In addition, if we reinvest the tax savings generated by the contributions into the retirement plan itself, we can reduce the savings effort or save much more with the same effort.
You’ll Improve the Well-Being of the Rest of Your Life
Our pension will never be identical to the salary we received. It may or may not come close, but if we don’t have a supplement, our standard of living will suffer. The pension plan can therefore help to ensure that we do not lose purchasing power once we retire from working life.
Saving for this stage serves to guarantee a good quality of life in retirement, considering to the great risk that longevity entails, namely dependency. The additional savings that are obtained with the retirement plans are also useful to help in a more difficult stage that may be reached, such as dependence. In these cases, having sufficient savings is crucial to be able to meet the costly treatments and needs that may be required.
There Is Something for Everyone
In addition, pension plans allow us to systematize savings and not have to make great specific efforts, because they offer great diversity in terms of risk profiles, so that everyone can find the one that best suits their needs.
Indeed, there is a wide variety and typology of plans, from the most conservative to the riskiest, or those with active management or those that prefer to copy the indices.
Your Money Is Protected
Pension plans are generally supervised by the Directorate General of Insurance and Pension Funds and, among the bodies that control them, the Control Commission, the managing entity and the depository entity.
They must pass an annual audit of their annual accounts and every three years an actuarial financial report. In addition, the equity is not on the entity’s balance sheet, so that in the event of bankruptcy, the pension plan is not harmed. In other words, the money belongs to the investors, not the management company or custodial or trading entity. So if something was to happen to the bank you signed your pension plan with, the management company would simply replace the custodial entity with another.
So there you go! With these reasons in mind you now know why we recommend to get a retirement plan. Are you looking for financial experts in Toronto? Check out Nonmed Insurance Inc.. They offer insurance protection, retirement planning, non-medical life insurance, life insurance, and more.