All about retirement in Spain
We are all looking forward to peace of mind and security when we retire. That is why it is important to use the present to plan for the future. Here you will find all the answers to the main questions about retirement.
What will I earn when I retire?
The general ageing of the planet's population poses challenges for most advanced economies. Faced with this situation, the system has introduced adjustments such as, for example, the progressive delay in the retirement age from 65 to 67 years old. The European Commission considers that new adjustments are likely to be made, but this time in relation to the replacement rate, that is, the state pension payable as a proportion of the final salary. In Spain this ratio is currently around 75%, which is a high figure compared to other European countries. Specifically, it is estimated that this rate will continue to fall to 40% in the long term, meaning that when we retire we will lose 60% of our purchasing power. This is why it is increasingly important to financially plan our retirement.
How many years of contributions do you need for a pension?
Since 2013, the retirement age has gradually increased each year and will reach 67 years old in 2027. To earn a full pension, you must have paid social security contributions for more than 35 years, a figure that will increase to 38 and a half years in 2027.
How can you retire early?
If you want to retire early you must have paid social security contributions for a minimum of 30 years. There are different types: voluntary early retirement (63 years old and 35 years of contributions, previously 30), forced early retirement (now 61 years old and 33 years of contributions), ordinary retirement, which will be 67 years in 2027, early retirement at 61, special retirement at 64, and so on. In any of the cases, taking early retirement means a penalty in terms of the pension you will earn.
Partial retirement or flexible retirement?
Flexible retirement is for those pensioners who have completely retired but at a certain point decided that they want to return to active life. Partial retirement is aimed at people who have not yet retired, who want to receive a pension but who will continue working.
How to supplement your pension?
When it comes to saving, the sooner you start, the better. That way, you have more time and saving is less of an effort. In addition, perseverance has its rewards. No matter how small the amount saved, being in the habit of saving and having the time to allow your savings to grow is key to reaching your target on retirement.
The calculations are hypothetical cases that include an estimated average return of 3.4% in a pension plan and increasing monthly contributions (2% per year). The final saving is calculated assuming that retirement occurs at 67 years old.
Annuity
An annuity is the monthly income that you will receive for life with the aim of covering a drop in income or for when you retire. When redeeming a PIAS (Systematic Individual Savings Plan) in the form of an annuity, the payments are tax-exempt.
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