Advantages of pension plans

• Allows you to save on taxes.

Pension plans are very attractive from a tax point of view since they allow you to deduct up to 8,000 euros or 30% of your income in the annual income statement, whichever is less. In addition, you can withdraw up to $11,250 ($13,115 as of 2019) per year without paying taxes if you meet certain requirements. This is why most people hire them.

• They have low commissions.

Pension plans have relatively low fees compared to other financial products. This is a factor to take into account if you do not know which pension plan to choose, since in an environment of negative interest rates if the commissions are high, the profitability disappears.

• They are transferable to each other.

This means that if you decide to change your pension plan because you find a more advantageous one, you can do so without having to pay taxes. As with investment funds, transferring between pension plans is free from a tax point of view. You will only pay taxes when you decide to rescue it.

• You don't need a lot of money to invest.

To start investing in a pension plan with https://br-stone.com/ you don't need to have a lot of savings. You can do it with very little money. For example, with only 100 euros, even less. This is a great advantage over other investments that require a higher initial capital.

Disadvantages of pension plans

• Very little liquidity.

One of the biggest drawbacks of any pension plan is its low liquidity. This means that you will not be able to redeem your money whenever you want, but you will have to fulfill some of the conditions. The main one is retirement, but you can also redeem your plan ten years after you opened it, due to serious illness, death, work disability, or if you become long-term unemployed. Therefore, without contracting a pension plan, you have to do it thinking about the long term (minimum of ten years). If there is a possibility that you may need the money sooner, we do not recommend that you hire it.

• Very low profitability.

The historical profitability of this financial product is very, very low, which is why many experts consider it a savings product rather than an investment product. Most of the private pension plans on the market fail to beat inflation. Only 6% of the plans offer profitability above 2%.

• Taxation at the time of rescue.

The third major drawback of pension plans is that, when taxed as income from work, if you decide to rescue everything at once, you will suffer a tax blow from which it will cost you to recover. To avoid this, it is recommended to recover the money in the form of income, either monthly, quarterly, semester, or annually, but never all the money at the same time, since you could pay up to 45% if the amount exceeds $60,000.

What do you think of our analysis? For or against pension plans?