2023-06-18 20:01:53
Personal finance: Life insurance or PER to prepare for retirement?
You wonder what is the best option to prepare for your retirement. The advantages of life insurance and PER are numerous, but they differ in terms of liquidity, performance, management and taxation. In this article, we will analyze these two options and help you choose the best one for your situation.
Liquidity and accessibility: life insurance is more flexible
It’s important to have flexible access to your savings, especially for unexpected expenses or to plan for major life events. Life insurance is more flexible than PER with regard to this criterion. You can withdraw your savings at any time, whether to buy a main residence, finance your children’s studies or prepare for your retirement by providing additional income.
However, when you place money in your PER, your savings are blocked until retirement, except in certain specific cases of early release. This can be an advantage, as it ensures that the capital remains intact, but it can be difficult to access these funds in case of immediate need.
Tax advantages of the PER for people with high incomes
The PER is a retirement savings plan that offers a significant tax advantage for people with high incomes. Indeed, voluntary payments made on a PER are deductible from taxable income up to a certain limit. The higher your marginal tax rate, the better the PER is for you.
For example, if you are in the 30% tax bracket, a payment of 1,000 euros on a PER reduces your taxable income by this amount, which translates into a tax saving of 300 euros.
However, it is important to note that the sums paid into a PER will be subject to income tax when the plan is liquidated, that is to say on retirement. However, since income generally drops in retirement, your tax bracket is generally lower than during working life, which means that you generally end up winning.
For those with modest incomes: life insurance is more attractive
If you do not pay income tax, putting money in a PER is of no interest because voluntary payments are not deductible. In this case, life insurance is a better option because it is very flexible and can be removed at any time.
The choice between PER and life insurance is an important decision. Each type of investment has its advantages depending on the investor’s objectives and tax situation. On the one hand, the PER offers an advantageous tax framework for highly taxed people and encourages regular long-term savings. On the other hand, life insurance offers greater flexibility in terms of access to savings as well as a variety of objectives to achieve such as supplementing retirement income, buying real estate, financing children’s studies, etc.
Conclusion: how to choose between PER and life insurance to prepare for retirement
In summary, the choice between PER and life insurance depends on your savings objectives, your tax situation and your ability to immobilize your savings over a more or less long period. It may be wise to opt for a combination of the two, depending on your short, medium and long-term financial goals. Remember to consult a professional before making your decision.
The PER and life insurance are two savings products that can help you prepare for your retirement. The earlier you start, the more time your savings will have to grow. Investing is a matter of patience and strategy.
In addition to PER and life insurance, there are other investment options for your retirement such as:
- Real estate investment: it is a safe and profitable investment in the long term.
- Investing in stocks: it is more risky, but it can generate high returns.
- The PEA (Plan d’Epargne en Actions): it allows you to invest in European equities while benefiting from an advantageous tax framework.
- Savings books: although their return is low, they offer total capital guarantee and immediate availability of money.
- Investment in SMEs: schemes such as the FIP (Proximity Investment Fund) or the FCPI (Community Investment Fund in Innovation) make it possible to invest in small and medium-sized enterprises while benefiting from tax reductions. taxes.
Remember that the best retirement savings option depends on your personal situation, savings goals and risk tolerance. It is therefore recommended to consult a wealth management advisor for personalized advice.
The most important thing is to start saving for retirement as early as possible. The earlier you start, the more you can benefit from the power of compounding, i.e. the effect of compound interest over the long term.
So, don’t wait and start preparing for your future today!
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