Last Updated on April 10, 2019 by Mr. FightToFIRE
Featured article on early retirement and the FIRE-movement
ING Belgium performed the interview to highlight the possibility of a nice (early) retirement when you have a solid pension savings plan using the tax advantage.
This tax advantage [NL] [FR] is 30% when you save up to € 980 and 25% if you save up to € 1260. This is a good option if you know you can’t or won’t save enough for later.
Aren’t there any downsides then? While this benefit looks tempting, like with all government incentives, it’s susceptible to the woes of the latest government in power. On top of that, you will also get “fined” 33% (+ community taxes!) of your total investment if you want to withdraw before you turn 60. Because of this tax benefit, the pension funds are strictly regulated which hampers their performance. While the best-performing ones aren’t doing bad (Metropolitan-Rentastro Growth Fintro has a 10-year avg. of 7.8% (2008 – 2018)), most aren’t great and an S&P500 tracker does better for cheaper.
I’m comfortable investing in the stock market, and I’m also more than slightly worried about what future governments might do with this benefit. Since this is the case, I shouldn’t bother with pension saving, yet I still do. It’s because of one reason: I can get additional tax savings through my employer’s cafeteria plan.
Knowing the above, what you should do will depend on your personal situation and how you feel about the above-mentioned attention points.
Take your time to decide what you want by reading the interview and letting me know what you think (apologies to my English readers) ;).
Besides the fact this interview was done in the context of pension saving, I’d also like to add a bit of extra nuance to certain things. To be clear, there is nothing in the article that I didn’t say, just sometimes I didn’t add enough nuance, hence these points:
- The statement “25 times your yearly expenses” is correct, but do note it is the expenses on which you want to live. So if you like to have some luxury, e.g., you spend 40K EUR per year, you have to save 1 million EUR.
- Yes, I am lucky to have an employer that offers me a subscription for public transport and monthly biking compensation
- It should be obvious but just in case, 75% is an average. As my recent quarter shows, it can definitely go well below it.
- I said 500K though it will probably be a range of 500K to 600K depending on, well, life. Same with the 1700 EUR per month. This can go up to something like 2500 EUR.
With all of that said, I genuinely want to thank ING (Belgium) for offering this opportunity and exposure and hope you enjoy the little read.