2024 began with the implementation of the new pension amounts. Last December, the government approved a revaluation of them according to the CPI of the previous year. In this way, contributory pensions experienced increases of 3.8% by 2024, while minimum contributory pensions registered an increase of 6.9%. It is important to highlight that widow’s pensions with family responsibilities saw a significant increase of 14.1%, raising the monthly amount from 905.9 euros to 1,033.6 euros.
Many workers are looking forward to the moment of saying goodbye to the working marketIn fact, some choose to calculate in advance the hypothetical value of their future pension. The Social Security It has a simulator for those interested in carrying out this operation, which leaves two results on the table: the total amount of the benefit and the deflated value. The latter is the one that generates the most doubts among citizens, who simply seek information about their retirement age and the possible subsidy.
He deflated pension value Retirement pension is an inflation-adjusted measure that allows you to compare the purchasing power of the pension at different points in time. Deflation is the process of adjusting a monetary amount to remove the effect of inflation. thus allowing to measure the real or constant value of that quantity. This adjustment affects the amount received, since, in a deflated analysis, it is revealed whether the purchasing power of the pension has been maintained, increased or decreased over time.
The deflated value of the retirement pension is calculated considering the inflation, that is, the cost of living at the time of the subsidy. Despite being estimates, Social Security evaluates the foreseeable evolution of prices. This adjusted value allows approximation a formula to encourage savings and improve purchasing power. Based on past and future quotes, and considering specific personal circumstances, the simulator will provide the nominal value and the deflated value of the future pension. The deflated value discounts the effect of inflation, estimating the inflation rate for the expected retirement date and adjusting the nominal value of the pension according to the following formula:
deflated value = nominal value / (1 + inflation rate expressed as decimal)
The Social Security calculator takes into account the years of contributions and the contribution base of the last 25 years. These factors determine the final amount of the subsidy upon reaching the ordinary retirement age. It is likely that a worker calculating his future pension will use current data, without considering possible salary increases that would also affect the contribution bases. Therefore, the result may not be completely accurate, highlighting the importance of knowing the deflated value of profit, an indicator that clarifies and adjusts the data.
Those citizens interested in planning their pension in advance and improving it with respect to the deflated value can consider various options: extend your working life some years, change the regime if possible or complement the subsidy with a private pension fund.
