What if you received a pension each month in addition to your salary or retirement pension?
It's the dream of many French people.
And it's no coincidence that Française des Jeux designed EuroDreams, its new drawing game which allows you to win 20,000 euros per month for 30 years!
A hell of an income!
It's nice to dream but, in the meantime, money doesn't fall from the sky or grow on trees.
However, it is not impossible to become an annuitant.
It takes a little time to get there and, above all, a lot of money to save.
As proof, with capital of 200,000 euros paid at 3% net (the current Livret A rate), it is possible to obtain 6,000 euros of income per year, or 500 euros per month.
With a higher return, for example 6%, a capital of 100,000 euros will be enough to receive the same monthly pension.
Easier to write than to do.
So how can you save these amounts?
To obtain 200,000 euros in 30 years (i.e. 360 months) you would have to save more than 550 euros per month.
Over the same period, with almost 280 euros per month, we would capitalize just 100,000 euros.
Quite discouraging.
The power of compound interest
However, this effort can be greatly rewarded... and reduced.
Thanks to the interest, which will be capitalized, you will obtain this amount more quickly.
This is called compound interest because it will in turn generate interest which will also produce other interest in an infinite way.
Simulation carried out on the site hellocoin.fr Screenshot
In our case, 200,000 euros would be reached in just 22 years with a return of 3% net annually.
That is 8 years ahead of the previous calculation.
Better still, by saving for 30 years, almost 320,000 euros will ultimately be saved.
If we find an investment at 6%, the 100,000 euros will be acquired in less than 18 years, or 12 years less than by not capitalizing the interest.
Over a period of 30 years, this strategy would even bring in nearly 270,000 euros in capital!
Almost triple the initial objective!
Simulation carried out on the site hellocoin.fr Screenshot
Therefore, this calculation shows three possibilities:
it is possible, after 30 years, to receive a larger pension than expected (since the capital is greater)
it is possible to reduce the monthly savings effort to build up the capital necessary for the objective
it is possible by maintaining the same savings effort to obtain the capital necessary for the objective more quickly
In summary, the earlier you save on an investment with a good return, the quicker you get rich.
You still have to choose the right financial product(s).
Read alsoThe 12 favorite stocks of managers to include in your PEA in 2024
A multitude of investments available
To save such sums in the hope of earning a lifetime pension, the regulated savings accounts (Livret A, Sustainable and Solidarity Development Account and the Popular Savings Account) will not be enough.
At best, they allow you to invest up to 44,950 euros.
The current rate is 3% for the first two but that of the last will already drop by one point to 5% on February 1, 2024. In addition, they will be useful for you to invest your precautionary savings (around 3 to 6 months' salary) who must remain available to cover an unforeseen expense.
Furthermore, since these regulated investments are indexed to inflation - which must fall - their rates should not remain at this level for very long.
For people who want to play it safe and ensure the achievement of the goal, euro funds from life insurance contracts can be a good option.
They can also turn to dated funds or term accounts.
However, as recent years have proven, their performance is not guaranteed.
For people wanting a more dynamic return, diversifying their savings across different supports on the financial markets, depending on their investor profile and their investment horizon, cannot be ruled out: real estate investment companies (SCPI), stocks, bonds, Sicav, ETF... This diversification into risky investments must be temporary.
“
There is a need for streamlined management, as with
retirement savings plans (PER)
, with progressive security of capital to gradually reach the objective,”
explains Philippe Crevel.
We consider that a diversified investment with a long investment period is preferable to an investment managed with interest rate products.
We must therefore provide progressive security to prevent a crash from melting the capital on the day of liquidation
,” adds the director of the Cercle de l’Epargne.
Beware of fees that will reduce performance and taxes that will reduce your pension
As we saw above, performance is the key to achieving this objective.
However, beyond yield, other parameters could harm the expected result.
The costs of the supports and investments you choose may affect part of the financial performance.
Over the years, these can cost you dearly and cause you to lose tens of thousands of euros.
It is therefore important to choose them carefully according to your objectives.
Finally, once the objective is achieved, another parameter could work against you: taxation on your winnings.
They can be important.
On an ordinary securities account, the tax on capital gains reaches up to (12.8% flat-rate withholding and 17.2% social security contributions).
Enough to eat into part of the annuity (made up of earnings) that you would hope to pay yourself.
To avoid this, life insurance or the stock savings plan (PEA) can be good ideas to reduce taxation.
After 8 years of ownership, life insurance offers gentler taxation and above all an annual reduction of 4,600 euros on earnings (double in the case of marriage or civil partnership).
For the PEA, after 5 years of holding, the earnings are exempt from tax (excluding social security contributions).
The payment ceiling is however limited to 150,000 euros.