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Voluntary savings: What you need to know to improve your pension

How can you do voluntary savings?

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process. Opinions expressed by Entrepreneur contributors are their own.

According to theCondusef , in Mexico only 44% of the adult population in our country (30.7 million) have the habit of saving, which is why the culture of saving is an activity that is developing within the population, as just like finding some alternatives to encourage this habit. One of them, and which is available to Mexicans, is the voluntary savings that they can make through their Afore .

Active workers have an individual account managed by a Retirement Fund Administrator (Afore) , in which a contribution of 6.5% of their salary is made, distributed among the employer, the employee and the government with the aim of making growth the heritage for the future through a pension . However, this could increase when implementing actions such as voluntary savings. To make better use of this benefit, experts from Principal Afore, share what you should know about this practice in favor of your financial well-being for retirement.

What is voluntary savings?

Voluntary savings is the additional savings that a person can make to their individual Afore account to increase the amount of their pension. In addition to this, depending on the objectives and priorities of each person, it can also be a useful instrument to meet other life goals that require investments in the medium and long term .

How can you do voluntary savings?

Depending on each Administrator, will be the options that exist to make voluntary contributions. In general, you can find eight options available through commercial networks, AforeMóvil, Ganahorro, E-Sar, App, portal or branch of your Afore, or through your employer.

Types of voluntary savings

There are four types of contributions. Although the main objective of making Voluntary Savings should be to do so with a long-term vision and improve your pension amount, the different options also allow you to meet other savings objectives:

  • Complementary for retirement: they are contributions that are made with a long-term objective, where the only purpose is to complement the mandatory contributions
  • Voluntary deductible: which have a long-term perspective with the aim of increasing the pension and can be withdrawn after six months from the last withdrawal made, or after six months from the date on which the first withdrawal was made. contribution implying a withholding of 20% of income tax .
  • Non-deductible voluntary: these contributions can be withdrawn after six months from the date the first contribution was made or after six months from the last withdrawal. This generates a 1.04% withholding of income tax on the income generated.
  • Long-term: can be withdrawn after five years from the last withdrawal made or after five years from the date the first contribution was made.

Voluntary savings is the additional savings that a person can make to their individual Afore account / Image:

Tax advantages of voluntary savings

Voluntary saving implies different benefits for the economic future such as tax, since these contributions can be deducted during the annual declaration, as long as this saving is kept in the Afore account until you turn 65 .

Returns from voluntary savings

According to CONSAR , the resources that are deposited in the Afore account on a voluntary basis are invested in the SIEFORE, which are the investment funds of the Afore, so that the resources work and generate returns in your favor. Voluntary savings will be deposited in two possible Investment Companies and you can choose the SIEFORE in which you want your Voluntary Savings to be invested.

  • Basic SIEFORE: Investment company that receives mandatory and voluntary savings in the event that the Afore to which it belongs does not have an additional SIEFORE to invest the voluntary savings.
  • Additional SIEFORE: It is the investment company that receives the voluntary savings and is exclusively for investing the voluntary contributions.

Now that you know the benefits of voluntary savings, it is appropriate to start doing it with the certainty that these resources will be safe and generating returns with the Afore of your choice.