What are Afores and Why Are They Important?
Saving for retirement is crucial to ensure a dignified life and a substantial pension upon ending your working years. Formal workers with an employment relationship are entitled to a retirement account, known as an Afore, for this purpose.
The Role of Administrators of Retirement Funds (Afores)
Afores are responsible for receiving contributions from each worker, the government, and employers, then investing this money to generate returns. This ensures that workers do not face the adverse effects of inflation when they retire.
What are Siefores and How Do They Work?
Siefores, or Specialized Investment Companies for Retirement Funds, are the investment funds in which Afores place workers’ savings. Understanding how Siefores function is essential for making informed decisions when selecting an Afore to manage your retirement savings.
Worker contributions are allocated to a Siefore based on their birth year. The Comisión Nacional del Sistema de Ahorro para el Retiro (Consar) supervises and regulates these Siefores.
Siefores are classified quinquenally, with separate funds for workers born between specific years. For example, there are Siefores for those born between 1999 and 1995, 1990 and 1994, and so on, with those born before 1960 falling into the last category.
There are ten basic Siefores determined by birth year, along with three additional Siefores focused on voluntary contributions to expand retirement savings.
Younger age groups’ Siefores are considered riskier, but as time passes, investment strategies shift towards lower-risk instruments.
Andrés Moreno, Director of Investments at Afore Sura, explained that Afores invest in various instruments allowing portfolio diversification and investment strategies.
“For instance, portfolios of 18-year-olds can have up to 60% in variable income instruments, while those nearing retirement may have up to 15%”, Moreno explained.
The Consar defines the percentages for triple-A, double-A, and single-A investments, as well as currency, stock, and other allocations.
According to the Consar, Siefore assets include government debt bonds, corporate bonds, stocks, infrastructure projects, currencies, and gold.
Monitor Your Afore Performance
To make the best decision when choosing an Afore, it’s essential to keep track of their returns. The Consar publishes reports comparing the net return indices of each Afore and age segment.
Through the Consar and AforeMóvil app, you can consult Siefore portfolios and learn about the financial instruments in which your money is invested.
Your Afore statement also allows you to check returns for all Afores and the Siefore to which you belong. Moreover, Afores are obligated to clarify any doubts without additional cost.
Key Questions and Answers
- What are Afores? Afores, or Administrators of Retirement Funds, are organizations responsible for managing workers’ retirement savings.
- What are Siefores? Siefores, or Specialized Investment Companies for Retirement Funds, are investment funds where Afores place workers’ savings.
- How are Siefores classified? Siefores are classified quinquenally based on workers’ birth years, with ten basic Siefores and three additional ones for voluntary contributions.
- How do Siefores manage risk? Younger age groups’ Siefores are considered riskier, but investment strategies shift towards lower-risk instruments as workers age.
- How can I monitor my Afore’s performance? Keep track of your Afore’s returns through Consar reports, the AforeMóvil app, and your Afore statement.
