An inefficient, poorly designed financial strategy will leave us with a hunger benefit of 25% of our last salary. Unfortunately, we donate 20% of our earnings for 40 years to wonder for another 25 years whether to pay rent this period or buy the essential drugs? If we build our pension plan based solely on ZUS, we will be sentenced to obey politicians and fight for survival. The following article aims to present respective of the many alternate ways of taking care of your own future.
What is IKE?
The first is the IKE, or Individual Pension Account. Its foundation offers many financial institutions, specified as banks and brokers. It is called “an antitaxacre”. This is due to the fact that it allows to invest, among others, in shares, bonds, ETFs and others, without having to pay capital gains tax, which is 19%! Sounds great, but in order to enjoy specified a privilege, we must meet certain conditions first.
The first spoon in a barrel of honey is the yearly capital limit we can invest under IKE. As we can see on the illustration below, the limit increases all year. For any it is not enough, and for others it is enough. The crucial thing is that there is no lower limit so anyone can invest. In 10 years the capital invested will amount to at least PLN 235 thousand, and that is simply a very circumstantial amount, right?
Source: stockwatch.pl
The second condition is not to pay money from IKE until it reaches the age of 60 or 55 with earlier acquisition of pension rights. If we have paid up our funds in at least 5 any calendar years before this moment, we are entitled to pay out all the capital collected there together with profits without having to worry about Belka's tax. How much savings is that?
For example, let's presume that at the age of 30 we opened our IKE account ]]>with the intention of investing]]> 1000 PLN per month. Let's presume that at this time the rate of return will be 5% per year. erstwhile we celebrate our 60th birthday our balance will be PLN 832 259 (360 1000 own contributions + over 470 1000 profits). 19% of this amount is PLN 89,729. Almost 90 1000 zlotys, which will be at our disposal alternatively of supplying the state budget.
Life, however, can be surprising. If we happen to gotta retreat our money from the IKE account by the age of 60, the only consequence will be paying 19% of the Belka tax. A taxation on profits that we would gotta pay anyway if we had invested outside of IKE. It is worth mentioning that we are already gaining by the specified postponement of the work to pay tax. Why? due to the fact that we can reinvest money that we would usually give back to you (19% of profits from closed positions). The larger capital invested will aid us make more money. The deferred taxation is the way to maximize profits. Importantly, we do not gotta pay the full amount once, but only the part we have set. The remainder of the capital will proceed to work for us.
What is IKZE
The Individual Pension Insurance Account has many similarities to IKE. Here you must besides make deposits in at least 5 calendar years. We can usage him. ]]>invest in akin financial instruments]]>, as in IKE and additionally in Voluntary Pension Fund run by the management company OFE. For this we cannot invest through IKZE in retail fiscal bonds indexed by inflation.
Source: stockwatch.pl
Here too, there will be a taxation reward waiting for us, although it looks a bit different. erstwhile filling out the yearly taxation return, we can deduct the money we paid to IKZE from our income. What does this mean in practice? If you gain little than PLN 120 1000 a year and are on the first taxation threshold, utilizing the deposit limit on IKZE you will save 12% of the amount paid. If you are on the second taxation threshold, it will be 32% of the amount paid, respectively.
Another similarity is the age condition. In IKZE, however, it is 65 years. erstwhile we've paid out our money after that time, we'll accumulate 2 benefits.
Source: Own development
Firstly, in the years in which we contributed money to the IKZE account we reduced our income taxation according to the taxation threshold in which we were located. So we paid a lower taxation all year. Secondly, you will pay 10% flat-rate taxation on the capital raised. You will besides pay 10% of the taxation on the profits earned, not 19% in force outside IKZE. In addition, you will postpone paying capital gains taxation for many years.
What if we want to usage the money from the IKZE account before we're 65? Unlike IKE, we're going to gotta pay out all the capital we've accumulated at once. We should besides be careful due to the fact that it may prove unprofitable to us. The full amount repaid (capital + profits) will increase the income that will come to taxation in a given year. There are 3 dangers:
our future earnings may be large adequate to account for us according to the second taxation threshold (32%).
future taxation rates may be higher,
the amount collected over the years on IKZE can be very large.
So it may be that the taxation credit we utilized to pay on IKZE was 12%, and erstwhile we pay before 65 we will gotta pay a taxation of 32%. Therefore, the IKZE account should not be the only 1 ]]>the funds we put distant for retirement]]>. Otherwise, there would be a advanced probability that we would be forced to pay all the funds before the prescribed time and pay a much higher tax.
When are IKE and IKZE not paying off?
It's truly hard to imagine a script where IKE doesn't pay off. Assuming we don't close or transfer our IKE account in the first year after its establishment, we don't gotta worry about extra fees. Therefore, at worst, we will pay a taxation of 19% on capital gains. In this context, we hazard nothing. However, given that, by engaging in any investment activity, we devote our precious time, I would like to point out that a household foundation will be a better solution for those with more wealth (in the context of time). This subject is further addressed in the following paragraphs.
Continue reading: ]]>Independent Trader - Financial independence]]>
Dividend investments. ]]>How to analyse dividend companies?]]>
