3 ways to build a pension

We are currently in challenging times and not just financially. Climate change, refugee crisis, war, rising inflation and a global health crisis. You may worry about many problems but have little influence over your own. But you can definitely change your financial situation. In this article I will take you in three ways to increase your pensionso you can really enjoy your old age. Life is already stressful enough, so I will also explain to you how you can save for an intermediate pension together – sabbatical. Are you reading along?

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Putting money aside for a carefree retirement

We all know about retirement, because who doesn’t save for a relaxed old age? In the Netherlands, we all receive AOW, which pretty much covers our basic costs. If you want to enjoy life a little more, such as eating out, going on holiday and occasionally buying the latest gadgets, then only the old-age pension is not enough. Certainly not in an increasingly expensive society! But how can you build up that buffer so that you are at least guaranteed a comfortable final phase of life?

This can be done with the help of supplementary pension savings. By increasing your future consumption area, you already get a tax advantage. There are three ways we are going to discuss here: investment, savings and bank savings.

1. Savings

Austerity used to be the standard. A portion of the income was set aside each month so that there were sufficient reserves for the holidays or in case the washing machine broke down. A pension was simply built up with the employer, which used to be the gold standard. Today it is really no longer obvious, and there are so many variations on the old employment that there are more people without pension insurance than with it.

Savings is a way to build extra capital, but then you shouldn’t have too many setbacks. Negative savings rates and soaring inflation, as is currently the case, are like a drop in the ocean. What are the advantages and disadvantages of this way of supplementary pension savings?

Advantage

  • The money is simply in your savings account, so you can always withdraw it;
  • You can now automatically save in the bank, so you can easily build capital unnoticed.

Disadvantages

  • You already pay wealth tax over €50,650 (2022);
  • With current interest rates, you are going backwards instead of forwards;
  • Low returns over the long term, so bad news for your pension;
  • The rampant inflation is not a good side effect.

What is saving? A child can do the laundry! Watch a video on easy storage below:

2. Bank savings

Bank savings used to be more normal than it is now, because we also call it annuity savings. If, like me, you’re a millennial, then you won’t be too familiar with this. This form of savings is not only slightly outdated in terms of practicality, because as a nest egg it is also no longer so lucrative. Take a look!

Advantage

  • Gradually build wealth for your retirement;
  • You already know what you will receive monthly;
  • You don’t pay tax now, but you do when you pay.

Disadvantages

  • No option to retire early and enjoy this buffer;
  • Complex way to save due to tax rules;
  • There’s a middleman involved, so it’s also an expensive joke.

Watch a video from Rabobank about pension savings below:

3. Investment for your pension

Of course, I think investing for your pension is the most interesting option. You can invest in all kinds of assets, so you can invest in your future with a diverse portfolio. This is obviously not financial advice as you should always do your own research! Don’t blindly trust other people’s opinion and don’t follow someone’s gut, because it’s your money! That being said, I want to take a closer look at retirement investing.

Choose to invest in stocks, real estate, bonds, NFTs, crypto and mutual funds. Whether you invest a monthly amount in Bitcoin (BTC), regularly buy shares via DEGIRO, invest in gold or simply add the ETFs from BitPanda: the choice is yours!

Please note: pension investment is an official form of retirement savings where your options are limited. For example, you can invest through certain pension savings schemes, but you cannot sell earlier and have the profit paid out. This is of course possible when you invest without an official protocol.

Advantage

  • In the long term, a relatively high return;
  • Pay minimal tax with your annual tax return;
  • Experience tax benefits;
  • Bring diversity to your portfolio to spread your options.

Disadvantages

  • No guarantees, as with the other forms of supplementary pension savings;
  • Selling early and withdrawing the money is possible with investing, but not with investing in pensions;
  • Pay wealth tax over €50,650;
  • Laws and regulations change frequently so you need to keep monitoring this.

Watch a video on retirement investing below. If you want to know more about investing in general, follow the AllesOverCrypto channel!

How much money do you really need for your pension?

If you’ve never thought about this before, this is a good first step. You now know what the options are for building a pension, but how do you get there? We consider around 70% of your most recent earnings as a good pension. You can see how much you are expected to receive via the public platform and via your pension provider(s), but this is only the pension earned via official pension routes. Any investment and savings accounts are not included.

Imagine that you are now in your thirties and suddenly think: damn, I have to do something later! If you are single and have a monthly gross income of approx. € 2,250, then you assume (70%) a target amount of € 1,575 per month. This is the amount you will need later to live comfortably. There are two steps to get from today to a relaxed old age and they are the following:

  1. What is your goal?
  2. How much time do you have left to work towards this?

If you are 30, then you still have about 35 years to work towards your pension. Your savings account may still be a little empty and abandoned, so you have a real baseline and have to start with nothing. Do you need a higher income first before you can start saving for later? So read this article on how you can earn passive income with crypto, among other things.

Conclusion

Looking for more information or have questions about these ways to build retirement? Or would you like to meet other crypto enthusiasts? In our product’s free Discord channels Money Mastery from AllesOverCrypto you can ask questions and meet thousands of other crypto enthusiasts. Have other crypto-related questions? The easiest way is to look up your question in our FAQ. Another thing you can do is google your question + All about crypto. Let us know your thoughts on these ways to build your retirement!

Photo by George Milton

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