What is AFORE and PPR?
The Afores are financial entities that are exclusively and professionally dedicated to managing workers’ individual retirement savings accounts. This account accumulates all the resources generated by the worker throughout his working life, which are derived from the contributions made by the employer, the government and the worker himself.
The PPR is a financial tool, generally contracted by an insurance company, that allows an individual to plan and secure his or her economic future through an investment account aimed at generating long-term funds with the objective of having a stable lifestyle during old age.
Neither is better than the other, they simply complement each other. An individual can have both accounts to increase the resources in his retirement savings, which in the end, will benefit him and his family.
Benefits of having an AFORE:
- The worker is the owner of his own retirement savings account; he alone controls the way in which he wishes to manage his contributions in order to reach a dignified and stable retirement.
- The worker is the only one who knows the resources he/she has generated from the first day he/she begins to contribute, and he/she can view it through his/her Account Statement.
- The money that the worker generates in his/her savings account is not lost, even if he/she stops working; on the contrary, it generates returns until the retirement age is reached.
- Savings in the AFORE are inheritable; when the owner of the account dies, the resources are transferred to the persons designated by the worker as beneficiaries, provided that they comply with certain conditions established by the Social Security.
- The employee can make voluntary contributions as a form of short-term savings and withdraw them from time to time.
- The employee can deduct in his annual income tax return the voluntary contributions he makes in the long term.
Benefits of having a Personal Retirement Savings Plan (PPR):
- It allows the individual to choose the investments that best suit his or her personal needs and objectives.
- Like the AFORE, voluntary and complementary contributions can be deducted in the individual’s Annual Income Tax Return, provided that certain legal requirements are met.
- The income generated by your investments is tax exempt.
- The individual may retire and draw on his savings before the age of 65, only if he is unable to perform gainful employment due to a permanent disability.
- It beneficially complements the AFORE Savings account.
- Inflation-protected, the yields allow the individual’s money to grow above inflation levels so that its value always remains the same.
Retirement may not be something to worry about now, but it is important to start planning for it so that, in the future, we will have sufficient funds to allow us to lead a full, comfortable and stable life when we no longer have the opportunity to work.
