This article was written byfinancial expert from Belgium Sarah Zwaenepoel
For many of us, our retirement still seems far away. Still, it’s never too early to think about your financial future. For that, you’ve come to the right place at Elfin! Retirement savings is a smart and tax-deferred way to build up a nest egg, even if you are still in the thick of your career. In this article we look at: how does retirement savings work in Belgium?
Retirement savings in Belgium
Most of us will need between 2,000 and 3,000 euros to maintain the same standard of living during retirement than we have now. Inflation alone will cause you to need a lot more than you do now. Hopefully your house will be paid off by then, but you may also want to take an outing. 3,000 euros a month sounds a lot, but nothing is impossible. Ready to fly in?
Your state pension
If you have worked, you will be entitled to a statutory pension. Among civil servants, the average is around 3,000 euros, the lucky ones. A wage earner with a 45-year career gets around 1,300 euros per month and a self-employed person around 900 euros per month. Gross. There are still taxes to be paid on that, if not that much. Want to know approximately how much you will get? Then check out www.mypension.be. Beware, the further away you are from retirement, the more that amount may change. If you decide to become self-employed tomorrow, know that you will get a lot less than they are currently anticipating.
A pension through your employer
A lot of companies already do retirement savings for you, but this is not mandatory. Want to know and want to know how much, if any, has already been saved? If so, check with your human resources department.
Bank retirement savings
Supplemental retirement savings at the bankis the bare minimum you can do to work on your future. The returns are not astronomical, but you get a tax benefit and you are working on your future. Retirement savings through the bank can be as little as 25 euros per month and are best done as soon as you start working without student status and thus paying taxes.
In Belgium, you can participate in pension savings through a pension savings fund, pension savings insurance (branch 21) or investment insurance (branch 23). The retirement savings fund is the most well-known. This is one fund in which the bank invests for you for your retirement.
Retirement savings insurance is a safe option where you receive a guaranteed return along with possible profit sharing. The return with such insurance is on the low side, rather 2 to 3%. This is actually just enough to counter inflation and thus an absolute minimum.
The retirement savings fund or branch 23 is an investment product where you invest in a fund managed by experts. The return depends on the performance of the fund and may vary. Entry costs and risks are higher here, but so are returns generally.
With funds, it is best to save monthly rather than annually. Thus, you have 12 chances a year to get in when the investor price is low and thus have a better chance of a greater return.
The big advantage of retirement savings is the tax benefit you get. 30% of what you save, you get back through your taxes.
You can save up to 990 euros a year in retirement in 2023, and you’ll get 297 euros of that back through taxes next year.
Also fairly new is that you can save up to 1270 euros per year, and then you get a 25% tax break. But beware, in that case it is best to save at least 1,188 euros, otherwise you will have less tax benefit than in the previous option. Since retirement savings are through the bank, it’s best to ask there if you still have some room to increase your retirement savings.
Anyone who saves for retirement and started before age 55 will pay 8% taxes at age 60 on the amount you have accumulated at that time. From then on, you can also withdraw all or part of your money from a retirement savings fund. But more interestingly, you then continue saving until age 65. This is because you still have your tax benefit, but no more additional taxes on those last 5 years.
With retirement savings insurance, the end date is usually your 65th birthday. From then on, you can also withdraw your full amount, or get monthly returns paid out.
Every year you wait to save for retirement, you miss out on an average of 10,000 euros.
So much for the 3 pillars the government talks about in boring terms. For the self-employed among us, there is such a thing as VAPZ. The Free Supplementary Pension for the Self-Employed. If you are self-employed in a main occupation or pay social contributions as a main occupation in a secondary occupation (and thus earn your living very well in a secondary occupation), it is more interesting for you to enter into such an OAPZ on your business. Taxes are lower and the amounts you can save are greater than individuals.
There are, of course, many other ways to engage in retirement savings. All the investments and investments we make are actually done with “later” in mind. Often precisely to supplement that statutory pension.
Your fiscal basket
Each Belgian has a tax basket of 2,350 euros. You can make investments that are tax-deferred up to that amount.
If you have a mortgage loan with a housing bonus, it is already in your tax basket.
Retirement savings and long-term savings are also both part of this basket.
It’s best to discuss with your bank how best to fill this basket to enjoy as many tax advantages as possible.
If you don’t have a mortgage with housing bonus, it might be interesting for you to do retirement savings for 1270 euros, and possibly some long-term savings on top.
I myself have a home with housing bonus, and so for me it doesn’t make much sense to make retirement savings above 990€, or to enter into a term account, since I no longer have a tax benefit from it. Then I better invest my money in stocks with higher returns.
Long-term savings is the latest way to make tax-deferred savings for later. This can also be done through a Branch 21 or Branch 23 insurance policy. The entry cost will be slightly higher than traditional retirement savings, and at age 60 you will pay 10% instead of 8% taxes. But again, you get 30% back through taxes if there is still room in your tax basket.
Conclusion: pension savings in Belgium
As you can read, there are several ways to build your wealth for later. Retirement savings is an ideal first step for people who are still timid about investing. As with all forms of investing, it is better to do something with a smaller amount, than nothing at all. You will thank yourself at 65. Hopefully with a cocktail in hand?
