In a context in which public pensions are increasingly being called into question, savers need to take action. Investing in a pension plan is one of the best ways to supplement your retirement.
However, it is not enough to invest in just any product, in just any way.
There are a number of tips for investing in a pension plan so that you can set up a smart strategy and reap the greatest possible rewards in retirement.
The sooner you start, better
It is one of the maxims of any investor. The earlier you start investing, the better, even if you are not yet thinking about retirement.
The reason for this is twofold: on the one hand, because you have more time to recoup possible losses and, consequently, you can invest in an equity pension plan. In addition, they provide a higher return.
But above all, you will better exploit the full potential of compound capitalisation.
And the differences are striking: an investor who starts investing at the age of 30 and invests €100 a month in a pension plan until retirement at the age of 65 can obtain a total capital of almost €178,000.
However, if he were to start 10 years later, at age 40, the capital would drop to €81,000.
Choose the pension plan that best suits your lifestyle
Depending on where you are in your life, it is more advisable to choose one pension plan or another.
So, for example, if you are a young person, it may be more interesting for you to choose an equity pension plan with which you can obtain higher returns while assuming greater risk.
If, on the other hand, you are close to retirement, it would be better to opt for a fixed income or balanced pension plan.
In any case, the ideal thing is to mould your investment profile to your own time in life. Since transfers between pension plans are tax-free, you can change your profile according to your preferences. In this sense, a portfolio of pension plans is, for all intents and purposes, a better option than a single pension plan. As the years go by, your plan adjusts to your investment profile.
Take advantage of tax deductions
Pension plans are the only investment instrument with a beneficial impact on taxpayers’ tax returns.
Contributions are deductible in the IRPF taxable base, up to a maximum of €1,500 per year or 30% of the sum of the net income from work and economic activities received individually during the tax year.
Ideally, you should invest as much as possible, up to €1,500 in order to make the most of this tax benefit. After all, this corresponds to a monthly contribution of €125, although you can always spread it over different periods.
A plan with the lowest possible fees
Costs are one of the most important elements to consider when choosing a pension plan. Currently, the maximum fee that can be charged to a pension plan member is 2% for the management fee and 0.5% for the deposit fee.
But this does not mean that these are the commissions you will have to bear.
There are more and more options for investing with minimal fees, below 1%. For the sake of your future returns, it is essential that you choose a pension plan with the lowest possible fees.
Invest in an index-linked Pension Plan
The investment strategy for pension plans should be no different from that of other financial products, such as mutual funds.
You should seek as much diversification as possible with as little cost as possible, so that your portfolio can achieve maximum returns with as little volatility as possible.
And here index-linked pension plans are unbeatable, because not only do they have the lowest fees, but they also offer the best returns.
In fact, according to an IESE study, an investment in an indexed pension plan that replicated the IBEX 35 would have achieved a return 252.6% higher than the average of active pension funds that were marketed in those years.
Invest in a Pension Plan through inbestMe
If you want to open a pension plan, but don’t know where to start, thanks to inbestMe, you will have a portfolio of pension plans instead of a single product.
inbestMe will keep the portfolio adjusted to your investor profile and, if your personal situation changes, we will lower (or raise) the profile of the plan ourselves so that you don’t have to look for another fund that fits your new situation.
In short, a plan for life.