Have you ever heard that millennials won’t have a pension when we’re older? Although this idea has become quite common, it doesn’t mean that our generation won’t have a retirement pension. The thing is, the rules have changed, and now our savings carry much more weight.
It all has to do with IMSS Law 97, which took effect on July 1, 1997. If you started working and making contributions after that date, you’re part of this system, like most millennials.
Why is it said that millennials won’t have a pension?
Before, under Law 73, the IMSS calculated your pension based on three factors: the age at which you retired, how long you’d been making contributions, and your average salary over your last 250 weeks of work—that is, nearly five years.
With Law 97, it no longer works that way. Now, a fundamental part of our pension is the money we accumulate in our Afore, an account where our retirement savings are held.
Throughout our working lives, we, our employers, and the government make contributions to that account. In addition, the money is invested to try to generate returns.
So, how much will we receive when we retire?
It will depend mainly on how much we’ve accumulated. That money can be used to purchase a lifetime monthly pension from an insurance company or to receive periodic payments administered by our Afore, calculated based on our savings and other factors.
There is also a minimum pension guaranteed by the government for those who meet certain requirements, even if they have few savings.
For example, in 2026, you’ll need at least 875 weeks of contributions, in addition to meeting the age requirement and other conditions, to retire.
What can we do to secure a better pension?
Here’s the important part: if we save too little during our working lives, we might receive a pension that’s less than what we need to live comfortably.
That’s why one option is to make voluntary contributions to our Afore. In short, putting extra money into our account so we’ll have more savings when we retire.
Another alternative is IMSS Modality 40, which allows us to continue making contributions on our own after leaving formal employment, provided we meet certain requirements.
Does it work for millennials, too? Yes, but in a different way.
For those covered by Law 73, it can help increase the average salary used to calculate their pension. On the other hand, for those of us covered by Law 97, it serves to continue adding contribution weeks and money to our savings account.
So no, millennials aren’t doomed to go without a pension. The difference is that now, what we save during our working lives will have a much greater impact on how much money we’ll receive when we retire.
