What Is The Real Profitability Of Retirement Planning In Singapore?
We are going to analyze an example in a way that helps us analyze what real profitability can be expected from a retirement planning in Singapore.
Assuming a taxable base in the Income Tax of 32,000 euros corresponding to an approximate income of 40,000 euros . Its marginal rate, the one corresponding to the last tranche of its income, is 30% .
We made a unique contribution of 6,000 euros, obtaining a return of 8%. We capitalize both the profitability and the tax relief of the first year, reinvesting it again in the retirement planning in Singapore and deducting again for the fiscal benefit and the previous profitability and so on for 20 years. At the end of the period we would have 63546 euros, which yields an annualized average return of 12.52%. That is, the tax benefits that a pension plan provides and the effect of the reinvestment of the plan's fiscal savings in the same plan, as if it were compound interest or snowball, would have increased its profitability by 4.52 points. In other words, the reinvested tax benefit in turn increases the initial relative profitability by more than 50%, going from 8 to 12.52%. Is there anyone who gives more?
However, in order to calculate the real profitability of a pension plan, it would be necessary to consider the taxation that rests on the plan, that is, what we pay to the Treasury when we intend to recover the result of our savings.
To the extent that we assume that in retirement the rate at which we pay is lower than when we were active, it is convenient to consider what would be the most beneficial way to recover our investment.
The recent modification of the legislation allows to delay the decisions of the collection of the plan even if it is retired and can even continue to contribute to the plan as long as there is not a benefit from the plan itself.
For example, it is not unreasonable to think that if our pension plan has obtained an attractive historical return and is in the hands of good managers, it can be very interesting to be able to get into debt and not rescue the pension plan. So we could leave the same to our heirs which perhaps, especially to those with lower income (grandchildren) and if they are several better.
Important is not to be confused when subscribing a pension plan with a retirement insurance. The surprise can be capitalized.