“Sodra” predicts that soon more than 50 percent people in Lithuania will live in retirement for another 20 years on average.
Currently, the average life expectancy for men in Lithuania is 70 years, for women – 79 years, so without looking too deeply, it may seem that the predicted life expectancy in retirement does not correspond to reality. However, statistics show that retired men live in the country for another 15 years on average, women – 20 years, and more than 600,000 people receive an old-age pension in Lithuania. people.
In 2024, the retirement age for women is 64 years and 4 months, for men – 64 years and 8 months.
“Many people look at the average life expectancy statistics and shake their hands – after all, according to it, men spend only six years in retirement. This is how common myths and sayings arose – “I still won’t get a pension” or “I still won’t be able to use the money I’ve saved”. However, there is no need to match the average life expectancy – the numbers show that people who have retired continue to live full lives for a long time, and life expectancy is constantly increasing as living conditions improve, so it is likely that in 20-30 years we will spend many more years in retirement,” says Šiaulių bankas private client services manager dr. Parts for Kolmats.
D. Kolmatsui says that taking into account the expected time of life “from retirement”, it would be better to take care of its accumulation more responsibly – not to rely only on the ability to save and not to postpone decisions, because if nothing is done, the income in old age will decrease by two or even three times.
For two decades – with lower income
Table of Contents
- 1 For two decades – with lower income
- 2 Savings should be distributed wisely
- 3 The accumulated money will not disappear anywhere
- 4 What is happening in Lithuania today
- 5 Here are some People Also Ask (PAA) related questions for the title: **Lithuania’s Pension System: Preparing for a Longer Retirement**:
Table of Contents
If you receive only the “Sodra” pension, it will only provide you with about 30-40 percent. current income, reminds D. Kolmatsui. This means that you may have to live a very poor life for a very large part of your life.
“If you’re not saving, investing, saving, you have to be realistic and understand that your income will decrease in retirement.” Imagine if you had to cut your income in half today – how long could you survive on it even with some savings? And if you only get a third of your current income, what will happen in old age if you plan to live off the state pension alone? Of course, there is always the possibility to continue working. However, the question is whether you will really want it after retirement, and how long your health will allow you to do it”, D. Kolmatsui asks rhetorically.
A survey of residents’ investment, saving and retirement saving habits commissioned by Šiauliai bankas and carried out by the company “Spinter research” showed that almost half of Lithuanians believe that they will be able to live a quality life in their old age if they receive at least 75%. current income, and almost a third are convinced that only a pension equal to their current salary would ensure a quality life for them.
Meanwhile, financial experts estimate that expectations may not correspond to reality – approximately 50 percent. you can secure your current income by starting to save early in the II pension tier. One of the ways to secure a pension close to the current income is to accumulate in the III pension accumulation stage. Such accumulation in old age can allow securing 70-80 percent. current income.
D. Kolmatsui adds that, unfortunately, the attitude still exists in Lithuania that after retirement, funds are only needed for food, medicine and utility bills, so it is possible to get by with much more modest sums of money.
“This kind of attitude can be taken at the age of thirty or forty, but is this the kind of life we want?” Participation in society, the desire to travel, to have fun, does not end with retirement. Lately, I’ve even noticed a reverse trend – retired people finally want to relax and afford more than they did before. In the West, it is customary to use a part of retirement savings for trips and experiences that there was no time for while working,” the financial expert teaches.
Savings should be distributed wisely
A pension of a certain uniform amount paid regularly every month guarantees financial stability. However, managing your accumulated savings, withdrawals, etc., can be challenging in retirement.
The bank’s research revealed that a large part of the country’s population expects to live off their savings after retirement.
However, the study showed that a rare Lithuanian would survive for more than a year without losing his income – a third of people currently have accumulated an amount equal to 0.2-1 annual salary for retirement. Meanwhile, in order to transfer 500 euros from savings to yourself every month for at least ten years, you would have to save a considerable amount of money – 60 thousand. euros. – and don’t forget that this money depreciates every year.
A financial expert advises to think in advance how the savings will be spent. One option, she said, is to split the savings over, for example, a ten-year period and increase the monthly pension by a certain amount. Such a tactic would suit those who like to strictly follow financial discipline.
“A considerable amount of money received at one time is very easy to “splash” in a year or several. But imagine that you will live in retirement for 15-20 years and you really don’t want to enjoy life only for the first few years. As a result, the money should be spent either very meaningfully or distributed over a long period”, advises the financial expert.
D. Kolmatsu also reminds us not to forget to think about health costs. If you don’t have additional insurance, it’s likely that you will need to spend a lot more on health care in old age.
True, the financial expert also emphasizes that it is not necessary to give up investing at retirement age, especially since it can generate stable income.
The accumulated money will not disappear anywhere
D. Kolmatsui also denies another myth, that the money accumulated throughout the life in the II and III pension tiers will go to the state or the managers of pension funds after death without being able to use them.
“The law very clearly defines that funds accumulated in pension funds are hereditary, so they will eventually go to your relatives and they will be able to decide what to do with them,” says the financial expert.
In addition, she reminds that if exactly 5,403 euros or less is accumulated in the second tier pension fund, the pension accumulation company will pay this amount as a one-time payment. Also, if more than 64,841 euros have been accumulated in the Tier II pension fund, the part exceeding this amount can be withdrawn as a one-time payment.
D. Kolmatsui notes that it is likely that residents who started saving early will exceed this amount before retirement.
As for Tier III funds, less than 5 years before retirement and if you have been accumulating in a Tier III fund for more than 5 years, you can withdraw all accumulated funds without additional charge immediately, in a lump sum. If the contract is terminated earlier (in order to withdraw all the accumulated assets) or in order to withdraw a part of the accumulated funds, without terminating the contract, the amount of GPM relief received from the state should be returned, that is, 15% must be paid. personal income tax on the withdrawn amount.
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2024-09-13 05:44:13
What is happening in Lithuania today
Lithuania’s Aging Population: Preparing for a Longer Retirement
Lithuania is facing a demographic shift, with more than 50% of the population expected to live in retirement for an average of 20 years. According to “Sodra,” the country’s social insurance fund, this trend is driven by an increasing life expectancy, which has improved by 2.09 years from 72 years in 2000 to 74.1 years in 2021 [[3]]. As a result, Lithuanians are likely to spend many more years in retirement, emphasizing the need for responsible retirement planning.
Life Expectancy in Lithuania
Currently, the average life expectancy for men in Lithuania is 72.5 years, while for women, it’s 81.7 years [[2]]. However, retired men live for another 15 years on average, and women live for 20 years, with over 600,000 people receiving an old-age pension in the country.
Retirement Age and Income
In 2024, the retirement age for women is 64 years and 4 months, and for men, it’s 64 years and 8 months. While the average life expectancy statistics may suggest that men spend only six years in retirement, the reality is that people who have retired continue to live full lives for a long time. [[1]]
The Importance of Retirement Planning
Dr. Dalia Kolmatsui, private client services manager at Šiaulių bankas, emphasizes that taking into account the expected time of life “from retirement,” it’s essential to take care of retirement accumulation more responsibly. Relying solely on the ability to save and postponing decisions can lead to a significant decrease in income during old age.
The Reality of Retirement Income
If you receive only the “Sodra” pension, it will provide you with about 30-40% of your current income. This means that you may have to live a very poor life for a very large part of your life. Dr. Kolmatsui notes that if you’re not saving, investing, and planning, you need to be realistic and understand that your income will decrease in retirement.
Survey Results: Lithuanians’ Expectations vs. Reality
A survey conducted by Šiauliai bankas and Spinter research showed that almost half of Lithuanians believe they will be able to live a quality life in their old age if they receive at least 75% of their current income. However, financial experts estimate that starting to save early in the II pension tier can secure approximately 50% of current income. Accumulating in the III pension accumulation stage can allow securing 70-80% of current income.
Conclusion
Lithuania’s aging population and increasing life expectancy mean that people will spend more years in retirement. It’s essential to take responsibility for retirement planning, saving, and investing to ensure a comfortable life in old age. By understanding the reality of retirement income and taking proactive steps, Lithuanians can secure a quality life during their golden years.
References:
Lithuania’s Pension System: Preparing for a Longer Retirement
As “Sodra” predicts, more than 50% of people in Lithuania will live in retirement for another 20 years on average. This raises concerns about the sustainability of the pension system and the preparedness of individuals for their post-work life. In this article, we will delve into the current state of the pension system in Lithuania, the expected changes, and expert advice on how to prepare for a longer retirement.
Current Pension System in Lithuania
The pension system in Lithuania has undergone significant reforms since 1995. The retirement age has been gradually increased to 62.5 years for men and 60 years for women, with the goal of reaching 63 years and 4 months for women and 64 years and 2 months for men by 2021 [[3]]. Currently, the average life expectancy for men in Lithuania is 70 years, and for women, it is 79 years [[1]].
Challenges of the Pension System
One of the significant challenges facing the pension system in Lithuania is the dwindling workforce. According to a report, more people are expected to retire than enter the labour market in 2024 [[2]]. This implies that the burden of supporting the elderly
