Financial literacy is essential at all stages of life, but it becomes especially important when we talk about retirement. In Portugal, many citizens only begin to think about this stage late in life, which can limit the available options. The good news? It’s never too late to start—but the sooner, the better.
WHY PLAN FOR RETIREMENT?
- Life expectancy has increased We are living longer, which means we will spend more time in retirement. This requires a strategy to ensure income over several decades.
- The public pension may not be enough The Portuguese Social Security system provides a foundation, but it rarely covers the full pre-retirement income. Without a supplement, a significant drop in lifestyle is common.
- The cost of living tends to increase Expenses for health, housing, medication, and home care can represent a heavy burden. Having a support fund prevents situations of dependency or financial hardship.
- Planning means freedom With financial stability, retirement can be a phase of opportunities: traveling, dedicating time to hobbies, spending more time with family, or even launching a personal project.
WHEN SHOULD I START?
Ideally, retirement planning should begin at the start of one’s working life. This allows time to work in your favor through compound interest. Small monthly savings over many years result in much larger amounts than large savings made late in life.
Even if you start later, there is always room to improve your future financial situation with small changes and more conscious choices.
HOW TO START RETIREMENT PLANNING?
- Define the lifestyle you want to have Do you want to travel? Maintain your current standard of living? Reduce expenses? This vision will help you define your financial goals.
- Estimate future expenses Include housing, food, health, leisure, and any potential family-related costs.
- Check your contribution history Access the Segurança Social Direta portal and check your estimated pension amount. This is the starting point to know how much you will need to supplement with your own savings.
- Choose the right instruments
- PPRs (Retirement Savings Plans): offer tax benefits if held until retirement age.
- Investment funds or ETFs: ideal for those seeking better long-term returns.
- Private pension plans: supplement the public pension and help diversify income sources.
- Retirement certificates or scheduled deposits: lower-risk options for more conservative profiles.
- Set a savings goal A good starting point is to set aside 10% to 15% of your annual income. If possible, automate transfers to avoid missing them.
KEEPING THE PLAN UPDATED
A retirement plan is not static. Life changes—and the plan should follow.
- Review annually: review goals, contributions, and investment returns.
- Adapt to life events: marriage, children, career changes, or inheritances.
- Increase contributions whenever possible—salary raises or extra income are good opportunities to boost your retirement fund.
- Pay off debts before retirement: entering this stage of life without fixed monthly payments is a great advantage.
DIVERSIFICATION IS KEY
Relying solely on Social Security is risky. An effective strategy includes diverse sources of income:
- Rental properties: create a monthly passive income stream.
- Investments with returns (stocks, bonds): can provide annual dividends or interest.
- Part-time work: many retirees choose to remain active, both for enjoyment and for additional income.
PROFESSIONAL SUPPORT PAYS OFF
Many decisions involve technical knowledge, such as tax benefits, financial products, pension calculations, or asset allocation. Seeking help from a professional can prevent mistakes and maximize results.
CONCLUSION: THE FUTURE STARTS NOW
Planning for retirement is an act of responsibility and self-care. It’s not just about money—it’s about ensuring peace of mind, autonomy, and quality of life in an important phase of life.
Take advantage of the month of May to take this step: review your situation, set goals, and start—even if with a small amount.
In the next issue, we will address the topic of financial independence before retirement—and how financial literacy can be the key to achieving freedom while still in your working years.
Remember: The future is built on the choices you make today.
SOURCE: NEWS – MONTE REDONDO E CARREIRA LOCAL MONTHLY | YEAR 15 // NO. 165 | IN 2025
AUTHOR: Daniel Cardoso