20 Feb 2023 | Edukatips

How to Prepare Retirement Funds for Future

Have you prepared a pension fund for the old days?

Introduction to Pension Funds

Pension funds refer to funds established to meet the needs after retirement. Retirement itself generally starts after reaching the age of 55 and over.

Managing Pension Funds

Not everyone has that guarantees retirement. The solution is to set aside around 10 percent of your income to save for retirement in your financial plan. Make sure that the pension fund is consistently saved and only used when you are no longer actively working.

Tips for Preparing Pension Funds

If you are currently struggling to save a pension fund for future welfare, here are some tips to prepare a pension fund: 

1. Determine the Target Retirement Age

The first thing you should consider to prepare a pension fund is at what age you will stop working and earning regularly. Currently, the retirement age in Indonesia is in around 55 years old and older. This figure can be used as a benchmark.

The earlier you start preparing your retirement savings, the less effort you have to put into preparing funds for a prosperous retirement. It doesn’t matter if you are now 25 years old. Saving for retirement can be prepared early.

2. Increase Income Sources

Preparing old-age savings for retirement purposes certainly requires an adequate budget allocation to invest. You need to increase your source of income to be sufficient to save for all the financial plan posts by looking for additional income.

You can look for side hustles as a side job. For example, you can freelance part-time as a writer, make-up artist, event MC, translator, and so on. This will provide a decent income to supplement your income and be allocated to your retirement savings.

3. Pay Off Debts and Instalments

Preparing for retirement can start with paying off your mortgage, vehicle, and other debts. If you are financially independent, you can immediately start preparing for a retirement fund.

By paying off various instalments in retirement, you will be able to utilise the investment goods that you prepare “rent-free”. Thus, reducing your monthly expenses significantly and increasing your retirement fund allocation.

4. Be Consistent with Your Financial Plan

Consistency is key to properly collecting pension funds and not using them for consumptive needs. Usually, one has to set aside 10 percent of their income for retirement.

For example, if you have an income of 4 million per month, then in a year you will have Rp48 million. For that, set aside 10% of this income every year to be used as your retirement savings consistently.

5. Have Insurance 

In old age, elderly people are at higher risk of getting sick compared to the younger version of themselves. For this reason, an investment instrument can be chosen for health and life protection. The types of insurance that can be chosen are health insurance and life insurance.

Why should it be secured from now on?

The older we get, the more expensive insurance premiums will be. By having insurance when you are still young and healthy, you’ll have more freedom to choose the right insurance according to your current financial condition.

Currently, BCA has a selection of insurance products that can be chosen for the protection of the elderly or millennials wishing to prepare for the future. Check the information here.

Understanding the importance of managing pension funds early on will further increase awareness that it is better to prepare pension fund allocations immediately.