What to do when you reach 50 without planning for retirement

Ricardo Mucci did not plan to retire. At the age of 70, he takes advantage of the learnings of decades working as a journalist and entrepreneur to dedicate himself to new projects, which provide him with the income he maintains today. “I’ve always been a Social Security contributor, but I retired at the age of 65 earning a minimum wage. I can’t live on a minimum wage, so I didn’t have much alternative”, he says.

The journalist, who has worked in communication vehicles and advisory bodies for public bodies, today works as a speaker, has an audiovisual production company where he produces documentaries and works with investors to launch a digital bank aimed at the senior public.

The trend is that the INSS (National Social Security Institute) retirement alone is not enough for the so-called “sandwich generation”, who, in addition to supporting themselves and their children, provide financial assistance to their parents.

Lack of planning for longevity is common. The Tsunami Prateado 2021 study, by the company specializing in data collection on the population over 50 years old, Data8, shows that 4 out of 10 interviewed retirees did not plan their retirement, an even higher number for men and population of classes C and D.

“What happens is that debts often accumulate, so 34% of the population has taken on new debts, 24% use their savings to survive and 20% ask for a bank loan”, reports Clea Kouri, founding partner of Data8.

How to start planning?

For Angélica Araújo, financial planner at Planejar (Brazilian Financial Planning Association), the first step is to reflect on the current moment. “The person needs to take pen and paper and think about their situation today in every sense, health, financial, social, emotional, professional, so that they can put on paper what they want and what they need to do to get there.”

The expert recommends that people try to understand their expenses and savings possibilities, as well as expenses and sources of income that they can predict for the future. Initially, it is important to check the social security situation at the INSS, seeking information through the simulation and extract from the Cnis (National Social Information Register) available on Meu INSS.

“Check if the data is correct, if all the companies he went through made contributions, if he paid any contribution below the rule. It is important to regularize what is missing to comply with the rules to become a retiree in the future”, says Araújo.

In the INSS simulator, it is possible to check how much time is left to retire in one of the transition rules created by the Social Security reform or in the definitive rule, which requires a minimum age of 65 years (for men). For women, the minimum age will be 62 as of 2023. You must have at least 15 years of payments to the INSS, for those who were already enrolled in the INSS when the reform began to take effect, in November 2019.

The planner points out that the INSS benefit is for life, regardless of remuneration, and can be an important source of income. “The person thinks how much he needs in retirement to live comfortably and whether, based on the INSS benefit and the financial situation at the moment, he will get this amount.”

One of the alternatives to save the necessary money is private pension. Carlos Heitor Campani, investment consultant and professor at UFRJ (Federal University of Rio de Janeiro), says that the ideal thing is for contributions to start as soon as possible, but that at age 50 it is still worth starting to invest in social security.

“Of course, to reach a certain income, compared to those who start at 20, they will have to make more efforts, but this is a natural consequence of the situation”, says Campani.

He recommends paying attention to the characteristics of the plan to verify profitability. For management fees for fixed income pension funds, it signals that the market parameter is a maximum of 1.5% per year. As for multimarket funds, with greater complexity in asset management, the maximum recommended rate is 2.2% per year.

According to Campani, a higher administration fee must be offset by other parameters, such as an actuarial table that estimates death at a younger age, a higher interest rate during the benefit period and the absence of a carry-over fee. The specialist points out that past profitability is also a good indicator to assess whether the manager fulfills what is promised, but points out that it does not guarantee good returns in the future.

However, if the amount available to invest and generate ‘savings’ is not enough to form a reserve in ten or 15 years, it will be necessary to seek alternative sources of income, in addition to reviewing the lifestyle to cut expenses.

In this process, it is important to revisit the planning according to the perceptions and needs that arise over time. “Planning for longevity is not static, but it is about having balance today, to have something positive tomorrow.”

Professional reinvention is one of the ways to earn income

In addition to saving money, it may be necessary to think about ways to reinvent yourself professionally in the coming years. With the job market failing to absorb the older population, the solution found by many is entrepreneurship.

“The person will have to use creativity and look into their talents to see what they can put at the service of humanity and have financial return”, says Araújo. That’s what Mucci did: the journalist combined the need to generate income with the purpose of contributing to improving the quality of life of people over 50 years of age.

“My focus today is to undertake, there is no alternative”, he says. “I’m using that asset that I think I have the best, which is creativity, daring and knowledge about this universe of longevity.”

Investments should focus on low risk

For Márcia Dessen, financial planner at Planejar, the objective at this moment should be to preserve the capital, and not to assume risks in its investments. Therefore, it recommends prioritizing fixed income in its various modalities.

“Post-fixed rate, a little inflation, possibly pre-fixed if the rate is very good, but I would say that the post-fixed rate that accompanies the CDI plus interest is the most appropriate alternative for those who want to preserve their assets in this phase of life.”

The expert also recommends that investors pay attention to the daily liquidity, in which redemptions can be requested at any time without the risk of financial loss. This attribute can be important for emergencies, since other alternatives do not allow quick redemption without paying fees.

Roberto Agi, partner at Alta Vista Investimentos, points to the importance of taking advantage of the current moment in which there is a favorable environment for those who invest in fixed income. For him, it is worth making an effort to have a little more in the budget now to take advantage of more attractive real interest rates.

He says that private pension plans have attributes that can be beneficial according to the investor’s objectives. When using PGBL-type pension, for example, with regressive taxation and application for a minimum of ten years, Income Tax can reach only 10% of the investment.

The idea is that the reserve built up over time provides the possibility of a future with better quality of life, as desired by Mucci, who is working to launch a digital bank aimed at the senior public.

“I do a job, I earn money for a while, it keeps me going for a while, then I do another job. Now, I’m getting involved in another project that can be more perennial, lasting and stable, which will allow me to have financial peace of mind and allow that other people also have, and can think about the future with more affection and security and have a present that is a little tastier, healthier and happier.”