AFP question (starting one)

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madsen77
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AFP question (starting one)

Post by madsen77 » Fri May 30, 2014 11:06 pm

I have used the Wiki Search for the board, and I did not see anything that I could relate to.

I start a new job on Monday. One of the documents they need is "Certificado de aflliación a AFP(debe aparecen la fecha de incorporación al Sistema)" or translated to "Certificate of aflliación AFP (the date of incorporation must appear System)". I tried understanding how to start one on the AFP Habitat, but is like reading even more foreign language to me.
Here are my questions:

1. What sort of documentation do i need to take to the AFP Habitat office to start a retirement fund?
2. Would it be recommended to get a seperate financial advisor for an AFP?
3. 401k's and IRA's seemed easier to understand, can AFP's be the same way once the financial jargon is understood?

Thanks in advance, I really have no clue on what to do for this.

Ryan

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Re: AFP question (starting one)

Post by zer0nz » Sat May 31, 2014 6:39 am

Off my phone now, to answer your questions

1) your carnet......

2) no

3) no idea, however its really simple.... each month your contributions is automatically deducted from your pay and put into your fund, the only think you have control of is choosing the company, and choosing the fund in that company a, b, c, d or e The funds vary in risk, the idea is that a young person should take high risk, a old person low risk.... you can get a login and change that risk monthly if you like......

the biggest problem i have with the scheme is when you get to retirement the company does an assessment and pays out the money as payment based on their prediction of your life expectancy...... i would rather the full fund become under my control at that age!... so hence my recommendation of exploiting the rule that allows foreigners to contribute to a fund outside of chile... you still need to contribute, but the rules allow you to take control of that fund at, or sometimes before retirement age!

I screwed up... i have 5 years of contributions stuck in chile until i retire... im young tho, so this is just a way of reducing my risks as i will end up with 4 retirement funds in 4 countries atleast before i retire! i wish i had made an effort to keep the chilean contributions out of the chilean system!

My australian fund went through 3 years of losses, but in the last 2 has made back the losses and then some!

who knows :/

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Re: AFP question (starting one)

Post by admin » Sat May 31, 2014 10:26 am

sprry z that post clipped was a little too close to home.
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Re: AFP question (starting one)

Post by madsen77 » Sat May 31, 2014 5:01 pm

Thanks Z for the post. I think after reading your post and a few other websites, I will be looking into something back in the USA. I know a few Retirement accountants that I trust. I will start looking more closely at this route. I am 37 with a chilean wife and us citizen son. So we could go back to the US if I was offered something really nice back home or if family issues arose. Considering I cashed my 401k through my old company back in the US, I would start from ground up on a fund and start out medium risk for the first year or 2 and once accumulated some leway money wise, start raising the risk factor to hopefully get gains I would like to see. Hope that makes sense.
I will sit down and talk with the GM of the KTM dealership Monday and talk to him more about this.

Thanks again.
Ryan

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Re: AFP question (starting one)

Post by zer0nz » Sat May 31, 2014 6:41 pm

madsen77 wrote:Thanks Z for the post. I think after reading your post and a few other websites, I will be looking into something back in the USA. I know a few Retirement accountants that I trust. I will start looking more closely at this route. I am 37 with a chilean wife and us citizen son. So we could go back to the US if I was offered something really nice back home or if family issues arose. Considering I cashed my 401k through my old company back in the US, I would start from ground up on a fund and start out medium risk for the first year or 2 and once accumulated some leway money wise, start raising the risk factor to hopefully get gains I would like to see. Hope that makes sense.
I will sit down and talk with the GM of the KTM dealership Monday and talk to him more about this.

Thanks again.
Ryan
Mmmmmm.... you will need to talk to someone who knows how the system works... as your wife is Chilean i don't know if this will apply to you... i presume your visa is the spouse visa? and i assume you will get PD if you haven't already... that leads to the question... can you apply this rule?

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Re: AFP question (starting one)

Post by SCL » Sat May 31, 2014 11:46 pm

''John C. Bogle''

Ryan,

Run Bogle's name in Google and you will get a good start in your M/Fund education.

To use US MF's as retirement tools you have to have access to: A) traditional or regular IRA's, which are not really recommended, as you have to pay taxes when you take your money out at the mandated age.
Or, B) Roth IRA's, which work pretty much the same way except that, among other advantages, you do not pay taxes on your gains. Yes, you take your money out when you decided (after the eligible age) and ''listo'': tax free.

{I am not religious, but once in a while, I look up and say: "thank you Senator Roth." He was an old traditional conservative guy who created this wonderful investment/retirement vehicle. }

[Incidentally, MF's in Chile seem to usually charge commissions between 2 and 3 percent. The US index funds do not charge more than a quarter of one percent. Imagine what that the Chilean commissions means to your retirement savings over 30 years...]

Bogle is very much respected for his theory/approach to MF investments. To put it succinctly, he believes in index funds because of their administrative cost to the investors. I do not want to be boring, so I''ll stop here.


Good luck.

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Re: AFP question (starting one)

Post by sqcpcg » Sun Jun 01, 2014 7:36 am

SCL wrote:Incidentally, MF's in Chile seem to usually charge commissions between 2 and 3 percent.
Yep, this is a money harvesting machine for the companies that manage the funds........ beaucoup $ evaporate from
customer accounts because of this. Over time, one can lose between 40% and 50% of the potential growth of one's
retirement fund when all is said and done. They have a delightful euphemism for this... it is called "load". The same
can happen in US retirement funds if money is put in the wrong place.

Just to clarify a little on IRAs, there are two main reasons to put money in an IRA.... to grow and to protect your
financial assets. IRAs, as government sanctioned retirement funds can protect your retirement money from legal
claims made against you/your assets.

A standard IRA usually consists of funds that have not yet been taxed by the government. Funds in Roth IRAs are using
money that has already been taxed (i.e. after tax money). When converting a standard IRA to a Roth IRA, or rolling
over money from a company retirement account to a Roth IRA, income taxes must be paid on the amount being put
into the Roth IRA that has not already been taxed.

When withdrawing money from a standard IRA, taxes must be paid on both the original money contributed as well as
what has been credited due to interest (i.e. growth) for the amount withdrawn.
Standard IRAs are subject to required minimum distributions (RMD) once the owner turns 70 and one half years old....
i.e. you cannot park your money there tax free forever.... the gummint wants their cut and does not want to wait
forever for it. Roth IRAs do not have RMDs until the original owner dies. Contributions must be in a Roth IRA for a
holding period of 5 years before distributions can be taken without penalty.

Planning what to do with retirement funds can be somewhat complex. It would be a good idea to talk to both a lawyer
as well as a CFP or an accountant for initial guidance. If you do a little research first you will be able to ask better
informed questions when you get together with them.

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Re: AFP question (starting one)

Post by El Lechero » Sun Jun 01, 2014 1:18 pm

sqcpcg wrote:
SCL wrote:Incidentally, MF's in Chile seem to usually charge commissions between 2 and 3 percent.
Yep, this is a money harvesting machine for the companies that manage the funds........ beaucoup $ evaporate from
customer accounts because of this. Over time, one can lose between 40% and 50% of the potential growth of one's
retirement fund when all is said and done. They have a delightful euphemism for this... it is called "load". The same
can happen in US retirement funds if money is put in the wrong place.

Just to clarify a little on IRAs, there are two main reasons to put money in an IRA.... to grow and to protect your
financial assets. IRAs, as government sanctioned retirement funds can protect your retirement money from legal
claims made against you/your assets.

A standard IRA usually consists of funds that have not yet been taxed by the government. Funds in Roth IRAs are using
money that has already been taxed (i.e. after tax money). When converting a standard IRA to a Roth IRA, or rolling
over money from a company retirement account to a Roth IRA, income taxes must be paid on the amount being put
into the Roth IRA that has not already been taxed.

When withdrawing money from a standard IRA, taxes must be paid on both the original money contributed as well as
what has been credited due to interest (i.e. growth) for the amount withdrawn.
Standard IRAs are subject to required minimum distributions (RMD) once the owner turns 70 and one half years old....
i.e. you cannot park your money there tax free forever.... the gummint wants their cut and does not want to wait
forever for it. Roth IRAs do not have RMDs until the original owner dies. Contributions must be in a Roth IRA for a
holding period of 5 years before distributions can be taken without penalty.

Planning what to do with retirement funds can be somewhat complex. It would be a good idea to talk to both a lawyer
as well as a CFP or an accountant for initial guidance. If you do a little research first you will be able to ask better
informed questions when you get together with them.
If you work for yourself in Chile you dont have to pay into the rip off AFP system that exists in Chile right? I have never contributed to one either working under contract or independently.

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Re: AFP question (starting one)

Post by john » Sun Jun 01, 2014 2:11 pm

sqcpcg wrote:
SCL wrote:Incidentally, MF's in Chile seem to usually charge commissions between 2 and 3 percent.
Yep, this is a money harvesting machine for the companies that manage the funds........ beaucoup $ evaporate from
customer accounts because of this. Over time, one can lose between 40% and 50% of the potential growth of one's
retirement fund when all is said and done. They have a delightful euphemism for this... it is called "load". The same
can happen in US retirement funds if money is put in the wrong place.

Just to clarify a little on IRAs, there are two main reasons to put money in an IRA.... to grow and to protect your
financial assets. IRAs, as government sanctioned retirement funds can protect your retirement money from legal
claims made against you/your assets.

A standard IRA usually consists of funds that have not yet been taxed by the government. Funds in Roth IRAs are using
money that has already been taxed (i.e. after tax money). When converting a standard IRA to a Roth IRA, or rolling
over money from a company retirement account to a Roth IRA, income taxes must be paid on the amount being put
into the Roth IRA that has not already been taxed.

When withdrawing money from a standard IRA, taxes must be paid on both the original money contributed as well as
what has been credited due to interest (i.e. growth) for the amount withdrawn.
Standard IRAs are subject to required minimum distributions (RMD) once the owner turns 70 and one half years old....
i.e. you cannot park your money there tax free forever.... the gummint wants their cut and does not want to wait
forever for it. Roth IRAs do not have RMDs until the original owner dies. Contributions must be in a Roth IRA for a
holding period of 5 years before distributions can be taken without penalty.

Planning what to do with retirement funds can be somewhat complex. It would be a good idea to talk to both a lawyer
as well as a CFP or an accountant for initial guidance. If you do a little research first you will be able to ask better
informed questions when you get together with them.
Ditto!
One must care about a world one will not see.
--- Bertrand Russell

SCL
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Re: AFP question (starting one)

Post by SCL » Tue Jun 03, 2014 8:27 pm

For those interested on what the administrators of the system say about returns on your Chilean retirement system, see "Fondos de AFP sobresalen en rentabilidad a nivel mundial" in El Mostrador, a pretty good internet paper.

Very badly written, in a very 'solapado style, truly Chilean in its many obfuscations, Margozini, the author tells you that it is one of the very best investment systems in the world.

It was published yesterday and it can be found when you open El Mostrador, in the Letters Section. Again, check the comments by readers: they are superb.


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Re: AFP question (starting one)

Post by frozen-north » Wed Jun 04, 2014 12:59 am


Pension Privatization Plunged Chile Into 'Preindustrial' Age

INTERVIEW: ISABEL MÁRQUEZ LIZANA

Márquez: As I indicated in my study, Chile, like other Latin American countries, was a pioneer in the area of social security, and by 1925 the first institutions had already been created providing protection and the social security system which existed up until the [1981 privatization] reforms.

http://www.larouchepub.com/other/interv ... rquez.html

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Re: AFP question (starting one)

Post by admin » Wed Jun 04, 2014 12:43 pm

AFP pros and cons aside, the gold in the AFP system for self-employed U.S. citizens, is being exempt from the self-employment tax in the United States. Whatever you pay in to the AFP, even the token minimums, is sufficient to get you off the hook for the 12.5% or whatever the self-employment tax is now in the States. Take that 12.5%, and go do something useful for your retirement.

People, retirement funds and pensions are scams. They are about concentrating wealth in as few hands as possible, not helping you save for retirement.

Gee this sounds good, 'just let our company hold on to a portion of your wages for the next 50 years, and hope you don't die in the meantime, we go bankrupt, or the government expropriates the funds in some way (e.g. inflation, devaluation, tax, or just plain theft), ha, ha, ha; and we will only charge you a small percentage (plus, commissions, fees, taxes, ...) for taking that risk with us, when we have no more frigen clue about what direction the markets are going than you or any trained monkey with a dartboard'.

Very, very, very few, anywhere in the World, have historically held together sufficiently long (a lifetime) or met whatever claim they were originally designed to meet (e.g. U.S. social security). I am not saying don't use them, just don't put all your eggs in someone else's basket and expect it to be there in 30, 40, or 50 years from now. Better to have a plan B through Z. Plenty of people have broke their backs all their life, just to find out there was no pot of Gold at the end of the rainbow when they thought there would be years later. How many government and company pensions have just evaporated overnight because of paperwork shuffle?
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From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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