SMART WAYS TO PREPARE A PENSION FUND
Do you realize that the purchasing power of money has weakened over time? If you remember, there was an Indonesian kids’ song saying that you could buy a bowl of meatballs with IDR 200; now you cannot do it, right? And this is what we call inflation. Inflation occurs from time to time along with economic growth and cannot be avoided. But, calm down Moduers. You can fight inflation by investing. By investing, you will beat inflation, and even reach your financial goals faster than just by saving your money. One of the financial goals that you can achieve by investing is to have a pension fund.
This article will discuss how to prepare and invest in a pension fund that You all can do as soon as possible or since you have income.
Here are four steps you can take to prepare to invest in a pension fund:
- Determine Your Desired Lifestyle When You Retire
There will be changes in activities and daily lifestyle that will affect your income and expense pattern when you enter the retirement period. For example, at your productive age, you need certain monthly expenses for transportation. But when you retire, you will probably commute less, so the expense for transportation will decrease. However, the expense of supplements and health care probably will increase when you retire. Or maybe now, at your productive age, you live in urban areas, but when you retire, you want to live in a village. This kind of needs and desires changes must be considered and calculated to plan your pension fund.
- Determine the Amount of Fund You Must Prepare for Retirement
After determining your desired lifestyle when you retire, calculate the amount of funds you must prepare plus inflation.
For example, now you are 30 years old and plan to retire 30 years from now, at the age of 60 (N = 30 years x 12 months a year). Based on the present value of money, you need IDR 1 billion pension fund. Due to inflation, today’s IDR 1 billion will have a different value from IDR 1 billion in the next 30 years. In this case, let’s assumed the average inflation in Indonesia is 3% per year. So, today’s IDR 1 billion has the same value as IDR 2.4 billion in the next 30 years.
- Determine the Investment for Your Pension Fund
You can use several investment instruments to prepare your pension fund, and a mutual fund is one of them. A mutual fund most likely suits you, especially if you are a newbie and don’t have much time to learn more about investing. When you invest in a mutual fund, you will be assisted by a professional, namely a fund manager.
In the early days of preparing a pension fund, which usually takes more than five years, you can consider investing in an equity fund or equity index fund that provides the highest return (also highest risk) among the other mutual fund types. Even though equity funds or equity index funds have the highest risk among other mutual funds, You can minimize this risk with regular long-term investments.
When you are about to enter your retirement (3 years before retiring), you can switch your equity fund or equity index fund to a fixed income mutual fund with lower risk, but the return is still above the inflation.
- Start Investing
The fourth and final step is to start practicing by set aside and invest your income for your pension fund. Since the earlier you start, the less money you need to set aside. You can also use the Moduit Navigator feature to find out how much money you need to invest each month and the Moduit Discipline feature to help you invest regularly.
Below is how to determine the amount of investment each month for your pension fund using Moduit Navigator.
You can access this feature anywhere and anytime through moduit.id or Moduit app, which you can download at Google Play Store or App Store. So convenient, right?
So what are you waiting for? Come on and prepare your pension fund now!