Background and Relevance
In Mexico, the Administrators of Savings for Retirement (Afores) manage funds on behalf of workers to ensure their financial security during retirement. These Afores receive contributions from both employers and employees, with the latter also having the option to make voluntary or solidarity savings.
Moisés Pérez Peñaloza, an expert in pensions and founder of the consultancy Yo Jubilado, highlights the significance of understanding the current trends in voluntary savings within Afores. His insights are crucial as the Mexican pension system undergoes reforms aimed at increasing mandatory contributions to 15% of an employee’s salary by 2030.
Current State of Voluntary Savings
As of now, there are 224,943 million pesos in voluntary or solidarity savings across all Afores. This represents only 3% of the total 8.29 billion pesos managed by Afores, with the remainder coming from mandatory contributions and investment returns.
In 2024, voluntary savings accounted for 3.55% of Afore assets, totaling 247,664.9 million pesos – the highest level since the Afore system’s inception.
Challenges to Pension Security
Pérez Peñaloza explains that despite the upcoming increase in mandatory contributions, two key factors will likely make it insufficient for ensuring dignified pensions for all:
- Increased Lifespan: People are living longer, which means retirement savings need to last for a more extended period.
- High Cost of Living in Old Age: Inflation, particularly in healthcare, drives up the cost of living during retirement.
Arturo García, General Director of Afore Profuturo, emphasizes another critical issue: inconsistency in workers’ cotization due to transitions between formal and informal employment or leaving the labor market for caregiving responsibilities.
These factors can lead to insufficient retirement savings, even with a 15% mandatory contribution rate.
Making Voluntary Savings
Workers with Afore accounts have several options to make voluntary savings:
- Deposit money through various commercial networks, including 7-Eleven, K, Extra, Bodega Aurrera, Walmart, Walmart Express, Farmacias del Ahorro, Sam’s Club, Chedraui, Punto Recarga, Financiera para el Bienestar, and Banco del Bienestar.
Key Questions and Answers
- What are Afores? Administrators of Savings for Retirement (Afores) are private, autonomous entities that manage individual retirement accounts for workers in Mexico.
- Why is voluntary savings important? Voluntary savings supplement mandatory contributions and help ensure a more comfortable retirement, considering factors like increased lifespan and rising living costs.
- How can I make voluntary savings? You can deposit money through various commercial networks into your Afore account.
