They say “work more, earn more.” But that’s not always the case because earning more can push you into a higher tax bracket, meaning you’ll pay more in taxes. This was a lesson I learned firsthand about ten years ago. At the time, I was taking on side gigs to supplement my income, only to find that the extra income almost matched the amount I paid in taxes. This experience led me to seek smarter financial strategies, ultimately discovering the Plan Epargne Retraite (PER).

My Journey to Smarter Savings

Before diving into the specifics of the PER, let me share a bit of my story. I realized that relying solely on my full-time job was not enough to secure a comfortable future. The extra income from side gigs helped, but the increased tax burden made it clear that I needed to find a more efficient way to save and grow my wealth.

I could have opted to stay home and live off social aid, but that’s not the kind of life I wanted for myself. Instead, I focused on finding ways to work smarter. This meant investing in my education and skills, but also learning about financial instruments that could help me secure a better future.

Discovering the Plan Epargne Retraite (PER)

During my quest for smarter financial strategies, I came across the Plan Epargne Retraite (PER). This retirement savings plan is designed to help individuals in France accumulate savings throughout their working life, with the goal of providing a capital or rent upon retirement. What intrigued me most about the PER were its tax benefits.

What is the Individual PER?

The individual PER is a flexible retirement savings product. It allows you to open a securities account or join a group insurance contract, offering various investment options tailored to your retirement goals. The plan adjusts your investment strategy based on your proximity to retirement, starting with riskier, high-reward investments and gradually shifting to more secure assets as you near retirement.

Who Can Subscribe to the Individual PER?

The individual PER is available to everyone, regardless of employment status or age. However, starting from the first quarter of 2024, minors will no longer be able to open an individual PER. Instead, a new savings plan, the Climate Future Savings Plan, will be introduced for those under 21.

How to Subscribe to the Individual PER

Subscribing to the individual PER involves purchasing it through a specialized business authorized to provide investment advice, such as a credit institution, investment company, or financial advisor. This ensures you get professional guidance tailored to your financial needs.

How Does the Individual PER Work?

The PER operates on the principle of managed management, meaning your investment strategy changes as you approach retirement. Initially, funds are placed in higher-risk, higher-reward assets. As retirement draws closer, investments shift to safer, more stable assets. This approach balances growth potential with risk management, ensuring your savings are both substantial and secure by the time you retire.

Payment Options for the Individual PER

You can fund your individual PER through voluntary payments. Additionally, you can transfer funds from other savings plans, such as a company PER, profit-sharing, participation, time savings accounts, or compulsory company retirement savings plans. This flexibility allows you to consolidate your retirement savings into one efficient plan.

Unlocking the Individual PER

Upon reaching retirement age, you can choose to receive your PER savings as a capital lump sum, an annuity, or a combination of both. This flexibility ensures that you can tailor your retirement income to your specific needs and circumstances.

Tax Benefits of the Individual PER

One of the most compelling features of the PER is its tax benefits. Voluntary payments to the individual PER are tax-deductible up to a specified limit based on your professional income. If you opt not to deduct these payments from your taxable income, you’ll receive a tax benefit when you withdraw the funds from the PER.

Why the PER is a Smart Choice

Choosing the PER is a strategic move for anyone looking to secure their financial future while minimizing tax liabilities. Here’s why the PER stands out:

1-Tax Efficiency
By making tax-deductible contributions, you can reduce your taxable income, effectively lowering your tax burden each year you contribute.

2-Flexible Investment Options
The PER offers a range of investment choices, allowing you to tailor your portfolio to your risk tolerance and retirement goals.

3-Long-Term Growth
Managed management ensures that your investments are optimized for growth when you’re young and for security as you near retirement.
Consolidation of Savings: You can transfer other retirement savings into the PER, simplifying your financial planning and maximizing the efficiency of your savings.

My Experience with the PER

Implementing the PER into my financial strategy was a game-changer. Not only did it provide a clear path to retirement savings, but it also helped me legally reduce my tax burden. By strategically planning my contributions, I was able to maximize the tax benefits and ensure a more secure financial future.

A Real-Life Example

Let me give you a real-life example. Last year, I contributed €5,000 to my individual PER. Given my income bracket, this contribution was fully tax-deductible, reducing my taxable income by €5,000. This deduction lowered my tax bill significantly, allowing me to save more money that I could reinvest into my PER or use for other financial goals.

Additionally, by investing in a diversified portfolio within my PER, I was able to take advantage of market growth, which further increased my retirement savings. The managed management approach gave me peace of mind, knowing that my investments were being adjusted to reduce risk as I got closer to retirement.

Tips for Maximizing Your PER

If you’re considering the PER, here are some tips to help you make the most of it:

Start Early
The earlier you start contributing to your PER, the more time your investments have to grow. Compounding returns can significantly increase your savings over time.

Make Regular Contributions
Consistent contributions, even if they’re small, can add up over time. Set up automatic transfers to your PER to ensure you’re regularly funding your retirement.

Review Your Investment Strategy
Periodically review and adjust your investment strategy based on your age, risk tolerance, and financial goals. Consult with a financial advisor to ensure your portfolio is optimized.

Take Advantage of Tax Benefits
Be sure to take full advantage of the tax-deductible contributions. This can provide immediate tax relief and boost your long-term savings.
Stay Informed: Keep yourself updated on any changes in tax laws or regulations regarding the PER. This will help you make informed decisions and maximize your benefits.

FAQs About Plan Epargne Retraite (PER)

1. What happens if I withdraw my fund before retirement?
If you withdraw funds from your PER before retirement, it can result in penalties and tax implications. Early withdrawals are generally discouraged to ensure that the savings are preserved for retirement.

2. How much should I save in a year?
The amount you should save annually depends on your retirement goals and current financial situation. A good rule of thumb is to save at least 10-15% of your annual income, but consulting with a financial advisor can provide a more personalized plan.

3. Can I transfer other retirement savings into my PER?
Yes, you can transfer funds from other savings plans, such as company PERs, profit-sharing, and participation plans, into your individual PER. This can help consolidate your retirement savings and maximize their growth potential.

4. What are the investment options within a PER?
The PER offers a variety of investment options, including stocks, bonds, and mutual funds. The specific options will depend on the provider, and your investment strategy will be adjusted based on your age and proximity to retirement.

5. Are there any fees associated with the PER?
Yes, there are typically management and administrative fees associated with the PER. It’s important to review these fees with your provider to understand how they might impact your savings.

Conclusion

The Plan Epargne Retraite (PER) offers a powerful tool for securing your financial future and enjoying a comfortable retirement. By understanding and leveraging its benefits, you can build a robust retirement savings plan that not only grows over time but also provides significant tax advantages.

Don’t wait any longer—start planning for your retirement today with the individual PER. Work hard, work smart, and ensure that your financial future is secure.

If you have any questions or need help setting up your PER, feel free to get in touch with us.