Retirement pensions in Ecuador average $661.95. They are higher than in countries like Peru ($300) and Chile ($290). More than 584,000 pensioners, including retirees and beneficiaries of the montepío, received these monthly incomes in 2021, according to the Ecuadorian Social Security Institute (IESS). However, only three out of ten older adults receive a retirement pension in the country. The rest live on the social bonds granted by the State, their relatives, savings (if they have them) or entrepreneurship.
The lack of resources does not allow the majority of Ecuadorians to have an old age with economic dignity. Flora Caguana, 80, says that “all her life” she worked informally and does not have a pension. She currently lives with one of her daughters and feels that she is “a burden” to her family. When asked if when she was young she thought about what her life would be like in old age, she replies: “I always lived from day to day, from the present, from getting daily food and I didn’t worry about my old age.”
The Inter-American Development Bank (IDB) affirms, in a study, that the majority of workers in Latin America and the Caribbean do not save for retirement. The functioning of the labor market, the design of pension systems, as well as people’s belief that the social security system is the only source of savings for old age is what intensifies the problem, says the IDB.
Although the lack of resources also affects pensioners. Sexagesimo Zúñiga, 92, has an IESS pension of $800 as his only source of income. The amount is higher than the national average, but he affirms that it is not enough to cover his expenses.
Without financial support and without compliance with their rights, how to undertake when reaching old age in Ecuador?
“I live with my 80-year-old wife and she does not receive a pension. We don’t have our own house and we rent. Between rent, food and medicine our pension is gone. That money is not enough for me, I would like to have the strength to continue working and have a better life. My daughters try to help us”, he assures. Sexagesimo regrets not having foreseen another source of income.
The calculation of retirement is defined based on the years of contributions and the amount that members of the Ecuadorian Social Security Institute contributed, which depends on the income they received. The reference is the five best years of contributions.
For the economist Héctor Delgado, the worker must plan his life in old age and this must be done at the time of greatest productivity. The expert affirms that the easiest way to prepare for this stage is to save, regardless of whether you contribute to Social Security. Then, invest that money in financial figures that generate some type of interest.
“They can be certificates of small deposits in banks. These certificates will grow little by little. You should also invest in the stock market through fixed and variable income. Also, invest in productive assets such as stores, houses, apartments, something that can be rented, that generates cash flow. This is how an investment portfolio is put together with a view to making the future the main source of income in old age“, He says.
Daniel Adler, an expert in financial education, agrees with Delgado that in order to have an old age with economic dignity, one must remember 20 years before retiring and understand that in the business world there are two tools that must be identified very well: assets and liabilities. .
“A person who wants to have financial freedom, independence and be able to have autonomy without having to exchange work hours for money must acquire more assets than liabilities. A liability is something that we acquire and it takes money out of our pocket, such as a vehicle that we use to walk around, a house that we use to live in, anything that does not automatically earn us money is a liability,” he says.
What are the conditions that must be met to retire in Ecuador?
That is why he recommends “filling up with assets”, such as stocks, bonds, trademarks, businesses, companies: “A person who is nearing retirement must first of all make sure that his money income is much greater than his expenses, that technically makes him a person with financial freedom. In other words, you must ensure that your retirement expenses are less than what you receive, but ideally, when you reach that point in life, you have accumulated so many assets that you do not need to live on a pension.”.
On the subject of savings, Adler points out that money must be ready for an action or investment, since it is not advisable to have “money saved without having it produced”, since that money saved without producing it becomes another liability.
“The aspect of saving is highly overvalued, it is not advisable to save money, money is a springboard to generate assets“, He says.
Average pension of retirees does not even cover the cost of the basic family basket in Ecuador
Carlos Segovia is 28 years old and currently works in an export company. He points out that as a result of seeing how his grandparents suffered financial anguish, he began to save and invest in certain figures for his future.
“I currently have three policies. One with a bank and two with cooperatives. I am always looking for what can give me more interest, but I decided that everything generated will stay for my old age. I want that capital to increase so I can buy assets. I have also thought about entering the stock market”, she states.
main keys
- Plan old age from the most productive work stage. Be clear about the monthly budget of expenses to know the global amount that would need to be covered monthly when reaching old age.
- Set specific savings goals, whether monthly or yearly.
- Invest in assets: stocks, bonds, trademarks, businesses, companies, real estate for rent.
- Reduce liabilities. (I)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
