Lifetime pension savings: the sooner you begin, the more you rake in
Keytrade Bank
keytradebank.be
December 16, 2024
3 minutes to read
You just left your school desk and suddenly there it is: working life. You are also instantly confronted with the current situation: higher retirement ages, life getting more expensive... If saving has never yet been part of your financial routine, now is the time when you should be starting to think about how you intend to finance your daily life after you stop working. So what is the ideal age to start saving for retirement? As soon as possible.
Why age matters when it comes to pension savings
As soon as you hit 18 – and therefore become an adult – you can officially start saving for your pension. The best thing to do is to open a pension savings account right away. Because every year you put off getting started is a missed opportunity.
Because the principle of compound interest – you get interest on interest every year – gives you a big bonus for every extra year you save. The later you start saving for your pension, the lower the returns that accumulate over the years.
This is anything but an unnecessary luxury once you know that the average statutory pension in Belgium is EUR 1,731 (PensionStat.be figures from January 2022). By investing more in pension savings, you are investing directly in a greater level of comfort in your post-professional life.
Save whatever you can spare …
By opting for pension savings, you can set aside a nice sum each month and still retain total flexibility. You decide how much you invest in your future each month, and for how long you do so. If you want to make slightly more or less effort one year, then that is perfect.
In addition, you can decide for yourself how much risk you take, for example by choosing between a pension savings fund (an investment) with the possibility of (much) higher returns or a pension savings insurance policy, with a minimum return.
At the start of your career, every euro may still matter. By opting for pension savings, you can set aside a nice sum each month and still retain total flexibility.
…. but don't forget the taxes
Please note that there are two savings amount thresholds that apply to give you to a tax refund worth having:
If you save EUR 1,020 per year (or EUR 85 per month): you receive a 30% tax reduction, i.e. EUR 306 per year
If you save EUR 1,310 per year (or EUR 109 per month): in this case the tax reduction is 25%, or EUR 327.5.
In this case, it is therefore a good idea to tailor your pension savings plan to obtain these tax benefits if possible.
Play (safe) with your pension savings
If you want to make the most of your pension savings, you can start at the age of 18 and continue until you reach the age of 65. The end result is a sum you have set aside that will help you live a more comfortable life in the years that follow.
After 40 years of pension savings, you should have an extra EUR 200 to 250 per month in your account. If you only start saving later, so for example, only save for 20 years then this amount will then drop below EUR 100 per month. Please note: the level of the return can also have a significant impact.
If you would like to get even better returns from your pension savings, invest your annual tax relief in other attractive financial projects, such as alternative investments. At Keytrade Bank, we are of course also happy to offer you our professional advice on this. Please contact us if you have any further questions about the many options for pension savings.
