Friday , August 12 2022

For Lithuanians – the chance to retire by 200 thousand. euro savings?


From the beginning of 2019, the supplementary pension adjustment formula will enter into force, allowing an average wage earner to accumulate approximately 200,000 personally in full-time employment for retirement in the other pillar fund. Euro. Such theoretical calculations under the new accumulation model were carried out by Lithuania's Investment and Pension Funds Association (LIPFA).

The scope of expected savings was calculated by modeling the situation so that the savings from the young person who started the pension together with government incentives will be invested according to the 25-year life-cycle fund model and immediately up to the maximum second step. LIPFA calculations are based on the assumption that full-time residents pay up to a tax of 1000 euros and the retirement age comes when the employee reaches the age of 65. During the accumulation period, the annual salary increase is estimated at 3.5-5 per cent per year.

It is assumed that for the accumulated 200 thousand. In the future, a person will be able to buy goods and services as much as now available for 91 thousand euros. Euro.

"The state social insurance system guarantees old-age pension, but it's no secret that in most cases they are hardly enough for essential needs, and therefore we estimated the savings that can be expected of a 1,000-euro residents on paper. Currently, non-active workers from 2019 the opportunity to enter the second stage and start saving retirement. After leaving the labor market, it will be a real source of income, says LŠPA President Šarūnas Ruzgys.

According to him, 3 percent of the person who pays up salary, together with 1.5 percent government incentives in 2070, should accumulate about 201,000. Euro. The specific savings may vary depending on the accumulation rate and macroeconomic conditions.

Currently 1.3 million or even 9 out of 10 officials increase their pension. According to Š. Ruzgio, the aging and emigration of the fast population will only strengthen new demographic challenges, which alone becomes increasingly difficult for the state to respond to itself.

"It's never too late to start saving. From next year's tax reform, almost all accumulators will be able to cover part or entire contribution to Tier II and will not reduce their revenues," says Š. Ruzgys.

When collecting pension in Stage II and awarding no more than 3 percent of salary, 1.5 percent of the contribution from the country's average salary is also made by the state. The future pensioner's funds are invested while the proportion of conservative investments increases.

When the person withdraws from the labor market and becomes an old-age pensioner, the biggest shock is that monthly income dramatically decreases, they need to rethink their priorities and learn to distribute lower income. According to experts, after 20 years, retirees may have to survive five times lower income, as the state will be able to provide them with only 23%. current wage pension.

In the second quarter of this year, the average salary in the taxing country was 918.8 euro and the average retirement pension for the state was 337 euro.

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