Retirement

A retirement plan is a long-term savings product intended to supplement the government-provided retirement pension. Usually, you contribute periodically or sporadically throughout your working years, and these funds are invested until redemption. Notably, one of the primary advantages setting retirement plans apart from other financial products is the inclusion of tax benefits.

One of the primary benefits of retirement plans is the opportunity for substantial IRS deductions, which can potentially reach up to €400 per year, depending on your age. This 20% tax benefit is tied to your income and allowable taxable deductions, ensuring that deductions within categories such as health, education, and more adhere to specific limits based on your income bracket.

To calculate your annual benefit, refer to the previous year's IRS assessment note, assuming your expenditure and income remain unchanged. Deduct eligible expenses from your taxable income, and the remaining amount can be allocated for contributions to your retirement plan.

Retirement plans with guaranteed capital eliminate the risk of capital loss. Upon redeeming your plan, your initial investment is fully ensured, safeguarding your capital. However, these plans typically yield lower returns.

Conversely, retirement plans without guaranteed capital carry the risk of capital devaluation, potentially resulting in a redemption amount less than your initial investment. Longer investment periods can help mitigate this risk, as short-term fluctuations have less impact. Opting for plans without capital guarantees can offer higher returns but comes with increased risk.