Advinans divides all retirement savings into three categories according to purpose and objective:
- Target Savings: savings with a clear savings horizon.
- Retirement Savings: savings for your retirement.
- Long-Term Savings: general savings without a clear savings horizon.
Target savings is what we recommend for all types of savings with an intended withdrawal target at a certain time in the future. Advinans’ target savings is a very clever tool to help you find the best way to reach specific saving targets such as saving for an apartment, a summer cottage or a contribution to a child’s first apartment. As the saving has a clear target date, a few years before the withdrawal date we will reduce the risk considerably and one year before the withdrawal date you will not take any real risk. This is in order to ensure that your money is secure for the planned use.
Advinans will not recommend target savings with a savings horizon of less than 3 years. The reason for this is that an investment fund portfolio with the appropriate risk would involve an expected return that is too low in comparison to the flat-rate tax on an ISK. To help you get good interest on your savings with a short savings horizon, Advinans is working on developing a savings account.
With Advinans you can have retirement savings privately and/or as an employee of a company that uses Advinans for its occupational pension. Regardless of the account form, retirement savings have the same characteristics. Like target savings, there is a clear date of use in the future but the difference is that retirement savings also have a longer withdrawal phase – for many people as long as 30 years. This means that you as a saver lose a lot of return on investment if you adjust the risk down too quickly. Only parts of the pension capital will be used during the first few years which is why you should keep a relatively high percentage of equity funds even at the beginning of the payouts – this will make it possible to achieve a total pension that is higher overall. Advinans will, depending on your risk preference, begin to adjust the risk of your retirement savings downward 10-15 years before the planned payout but we will still keep 60-80 % equity funds at the start of the payouts. The percentage of equity funds is then gradually reduced during the payout period, how quickly depends on the length of the payout period.
Advinans’ long-term savings are suitable for someone who wants to set up a general savings plan in order to build capital over time. The savings do not actually have a specific savings horizon but you should, due to the high percentage of equity funds, be willing to let the money remain invested for at least 10 years. The investment plan holds a high percentage of equity funds in order to provide high returns over time. The recommended percentage of equity funds is reduced from the age of 55, as the likelihood that you will need the capital generally increases during retirement.