Are you a freelancer? These are your options for saving for your retirement.

Having a pension at the end of one's working life, allowing one to live with peace of mind and dignity, is a right that all formal workers in Mexico have. However, those who work independently or are considered freelancers may have some difficulty planning their retirement savings.

For those who are employed, contributions to the retirement savings account are shared three-way between the employer, employee, and government, and are deducted directly from the salary. For those who are self-employed, they must manage their savings themselves.

According to experts on the subject, there are two ways to save for retirement: through social security institutions or through a private plan with a financial institution or insurance company. It's important to know the requirements and savings mechanisms that apply to each retirement plan.

Through social security

Gerardo Chavarría works as a business initiatives manager at Afore SURA and explained that continuing to contribute to the IMSS through these methods is an option if you had already contributed as a formal worker.

"If you've been self-employed for five years or less, you can enroll in Modality 40. If it's been more than five years since your last employment ended, the most viable option is Modality 10," Chavarría explained.

According to the Mexican Social Security Institute (IMSS), Modality 40 is a voluntary continuation scheme that allows workers to remain enrolled with their last salary or a maximum of 25 UMAs (85,986.5 pesos) and make the corresponding contributions.

It's important to clarify that this option only applies to those who began contributing before July 1, 1997, and must have contributed for at least 52 weeks prior to their last withdrawal.

Modality 10, on the other hand, is a voluntary enrollment scheme that guarantees those enrolled social security, medical services, disability benefits, and social security benefits upon payment of their contributions.

"For those who have always worked independently, we can register them as such, and their retirement account will be supported exclusively by voluntary savings," Chavarría explained, adding that, in this case, the savings can be accessed whenever the user wishes.

A private PPR

Another alternative is a private Personal Retirement Plan (PRP) with an investment institution or insurance company.

Luis Lozano, investment director at the Valmex brokerage firm, commented that PPRs serve as an external vehicle to guarantee retirement savings and tax benefits throughout the year.

"In some of these schemes, you can contribute based on your current income, monitor your investments, and obtain tax deductions," Lozano said, adding that deductions can be up to 5 UMAs per year, equivalent to 206,367.6 pesos.

If you decide to use your PPR as a tax instrument and deduct taxes annually with it, it's important to consider that when you withdraw your money, you will be taxed on a percentage of what you have accumulated.

Investment-based schemes, in addition to offering tax advantages, allow you to take advantage of the benefits of compound interest to increase your savings and have a larger pension at the end of your working life.

On the other hand, instruments offered by insurance companies may offer other advantages, such as fixed returns or disability, life, or health insurance policies linked to the PPR holder. However, these schemes typically require fixed, periodic contributions and have a specific deadline for making them.

"Before contracting any product, commissions, penalties, and contribution schemes should be reviewed to ensure that the independent worker won't suffer if their income decreases," the Valmex executive recommended, adding that it's important to verify whether there will be an age clause for using that money.

Finally, he recommended reviewing tax burdens when withdrawing money before age 65 and starting to plan how the PPR funds will be spent as retirement approaches, to understand how the money saved will yield results.