CBL Asset Management calculated what pension current forty-year-olds will receive. According to the bank's calculations, with an average salary in Latvia, the projected pension from the 1st and 2nd levels may amount to just over 1500 euros. But this is not certain.
How much does it cost to save for retirement? Calculations show that even a difference of 10 years can require several hundred euros more in monthly contributions. Nevertheless, almost half — 51% of residents of Latvia — still do not make contributions to the 3rd pension level, including people with high incomes, according to survey data.
The lack of savings in the 3rd pension level is characteristic not only of low-income groups. This is most pronounced among residents with incomes up to 550 euros, where 68% do not save, the survey data shows. However, the situation is not much better in the higher income segment — more than a third, or 35% of residents with incomes over 2000 euros, still do not form savings.
The survey also showed that savings are most often started between the ages of 25 and 34. Additionally, it is observed that the activity of saving increases with income levels.
Saving can cost thousands in the future
As emphasized by financier Karlis Purgalis, it is crucial not only to start saving but also to do so in a timely manner. "Both the choice of a risk plan appropriate to age and the timing of the start of savings are critically important factors. Timing is one of the most significant: even a difference of 10 years can lead to very substantial differences in the outcome."
The expert points out that, for example, for a 40-year-old resident with an average salary in Latvia — about 1850 euros before taxes — the projected pension from the 1st and 2nd levels may amount to just over 1500 euros. However, it should be noted that in 25 years this amount will be only about 50% of the last salary, assuming moderate wage growth.
"To significantly approach the income level during work and achieve, for example, a pension of 2500 euros, additional contributions to the 3rd pension level of at least 430 euros per month will be required, which will provide an additional approximately 940 euros to the pension. This clearly shows that starting to save only at 40 years old means that the necessary contributions already constitute a significant part of the gross salary," explains K. Purgalis.
If starting only at 50 years old
The situation becomes even more complicated if savings are started later. For example, for a 50-year-old resident with an average salary, the projected pension from the 1st and 2nd levels will be less than 1200 euros.
"To achieve a pension of 1500 euros, it is necessary to save about 350 euros per month, and for a pension level of 2000 euros — already about 900 euros per month. And this is almost half of the gross salary. This clearly shows: the earlier you start saving, the smaller the monthly amount required," emphasizes the expert.
The calculations are illustrative, and the situation of each resident may vary significantly depending on work experience, income levels, as well as investment results and the chosen level of risk.
