We are in challenging times right now and not just financially. Climate change, refugee crisis, a war, rising inflation and a global health crisis. You may worry about many problems but have little influence over your own. But your financial position, you can definitely change that. In this article I will take you along three ways to increase your pension, so you can really enjoy your old age. In addition, life is already stressful enough, so I also explain how you can save for intermediate retirement – sabbatical – together. Are you reading along?
Put 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 a state pension, which means that our basic costs are largely covered. If you want to enjoy life a little more, such as eating out, going on holiday and occasionally buying the latest gadgets, then old age provision alone is not enough. Certainly not in today’s 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 through supplementary pension savings. By increasing your future spending limit, you already benefit from tax benefits. There are three ways we are going to discuss here: investment, savings and bank savings.
Do you want to know what a pension looks like? Watch the video below for a good impression of a carefree life:
In the past, saving was the standard. A portion of the income was set aside each month so that there were sufficient reserves for the holidays or if the washing machine broke down. A pension was simply earned with the employer, which used to be the gold standard. Today it is no longer a matter of course, 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. A negative savings rate and soaring inflation, as is the case now, is like a drop in the ocean. What are the advantages and disadvantages of this way of supplementary pension savings?
- The money is simply in your savings account, so you can always withdraw it;
- Today you can save automatically in the bank, so you can build up capital unnoticed and easily.
- 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 skyrocketing inflation is not a good side effect.
What is saving? A child can do the laundry! Watch a video about the simple savings below:
2. Bank savings
- Build wealth slowly until you retire;
- You now already know what you will receive monthly later;
- You don’t pay tax now, but you do when you cash out.
- 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
Investing for your pension is of course 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 about your money! Having said that, I would like 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 BitPanda ETFs: 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 in certain pension savings schemes, but you cannot sell before and have the profit paid out. This is of course possible when you invest without an official protocol.
- In the long term, a relatively high return;
- Pay minimum tax with your annual return;
- Experience tax benefits;
- Apply diversity to your portfolio to spread your options.
- No guarantees, as with the other forms of supplementary pension savings;
- Premature selling and withdrawing the money is possible with investments, but not with retirement investments;
- Pay wealth tax over €50,650;
- Laws and regulations change quite often, so you need to keep an eye on this.
Watch a video on retirement investing below. If you want to know more about investing in general, follow the channel at AllesOverCrypto!
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 government 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 as follows:
- What is your goal?
- 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 zero measurement and have to start with nothing. This is not a one-time deposit and you will be working on your future every month. If you assume that the AOW benefit amounts to approximately €1,250 per month, a calculation shows that you need approx. €39,000 for every ten years after you reach your retirement age. Depending on how old you can get, this amount increases. If you turn 97, you must collect no less than €117,000. If you were to start immediately at age 30, €263.51 per month be sufficient. It’s the best thing to do right?
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. Be aware that you always build your wealth in consultation with a financial expert or that you investigate the matter yourself. In our country, the tax system is not always in accordance with our own ambitions and wishes!
What if you want to retire early?
Personally, I can imagine that you would like to stop working earlier. The more capital you build up, the sooner you can fully retire or perhaps start working less. What about an interim retirement, the old sabbatical, have you ever thought about it? A sabbatical provides new adventure in your life, or rest, just what you need. You have the time and space to do what energizes you, but then you need to create the financial space you need to do this.
What is a gap year?
A sabbatical is therefore a break from your work. A moment to live your life, without the constraints of everyday life. Of course, you can go backpacking, go on a long trip or just camp in your backyard. Whatever makes you happy, figure out how long you want to take that break. Going for a few months? Half a year or a year? Further? Depending on the duration and what you want to do in the meantime, you can make an estimate of the costs.
What does a sabbatical cost?
It goes without saying that 12 months on a world tour will be more expensive than six months in your own garden enjoying the birdsong. I once did a calculation for Peaks which showed that a six-month trip to Southeast Asia for two people cost €4,750 a month. For half a year it came to almost 30k, but there were domestic flights, many restaurant visits and exclusive trips included, so you can also do it much cheaper. For the same money, you can also choose to take 12 months off in your home environment, so it just depends on what you prefer.
A gap year has a positive impact on your life. It has all sorts of advantages, which makes it worth saving money for this. Watch Dennis DiDonna’s TEDx Talk below and learn from his experiences:
In this article we have discussed a pension and an intermediate pension, also known as a sabbatical. We have looked at three ways to supplement your pension; ways that are also fiscally possible in our country. There are many things to take into account, so we have explained the advantages and disadvantages of the three forms – savings, pension investments and bank savings.
I have shown an example of calculation for your old age so that you can also prepare this picture yourself. Remember that this is not financial advice, and always seek advice from someone who has substantial knowledge of finances and tax matters. Every situation is unique, so your life and financial situation also require a tailored approach. Start by defining your vision for the future. How much money do you need by then and how many years do you have left to achieve this? Of course, it is also possible that you want to retire at 50, in which case you have to adjust the calculation somewhat.
By adding more videos, I hope you got a good explanation of all your options. If you want to explore more, you can find plenty of information through this section. Of course, this platform is primarily focused on opportunities in the crypto and investor scene, but our blogs give a good picture of the current situation and how you can prepare for a positive future. Do you have questions or want to talk to like-minded people? So remember to visit our channels for a lively community. Go for it!
Looking for more information or questions about these ways to earn a pension? 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 talk to thousands of other crypto enthusiasts. Have other crypto-related questions? The easiest way is to look up your question in our FAQ. What you can also do is that you google your question + AllesOverCrypto. Let us know what you think about these ways to build your retirement!
Photo by George Milton