The current pension system was designed for a life expectancy of 75-80 years, but Romanians are living longer and the sustainability of this model is becoming uncertain, warns Alexandru Chirilă, CEO of Profit Point, a company specializing in financial education.
He warns that generations aged 30-40 will face serious difficulties in retirement without a well-thought-out personal financial plan.
### Long-term plans ignored
Chirilă states that most people live „from day to day,” without thinking about old age. Although they interact daily with individuals facing financial difficulties, few think about retirement.
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Most rely on the state or on pillars 2 and 3 without understanding the limitations of the current system in a context of low birth rates and high youth unemployment.
The declining birth rate and increased demands of young people entering the labor market create an imbalance. If the number of contributors to the system decreases and the duration of pension payments increases, the state will inevitably be unable to meet the needs of all retirees.
### A 30-year plan
At the age of 35, Chirilă says he started thinking about retirement at 30. To have a worry-free old age in a place like Spain, he calculated that he would need a liquid wealth of 3.5–4 million euros. He started by investing 20,000 euros and continues monthly with 1,000 euros directed into his own fund, built on geographically and financially diversified stocks and bonds.
Chirilă relies on realistic returns, around 10% per year. He is not looking for spectacular gains, but stability. „The power of compound interest” is the key to his plan, along with discipline and consistent long-term saving.
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### How to make your own plan
He recommends that every Romanian start with an analysis of the family’s life expectancy. From here, the total sum needed for the post-retirement period can be calculated based on an estimated monthly budget. Then comes determining current resources and directing savings into investments after an emergency fund is established.
The emergency fund should cover 3 to 12 months of expenses, depending on the job market volatility. For example, a librarian needs a larger fund than a sales employee. Only after setting up this fund can money be directed towards investments.
Chirilă’s proposed model is simple: „Income minus expenses equals savings.” Anything beyond the emergency fund is invested monthly for the long term. It does not require huge sums, but rather perseverance and well-calculated choices.