How to secure a pension for a trader
When you are 20 years old and full of energy, you have no desire to think about old age and retirement, but when you are already 60, it’s too late to think about what to live on if you haven’t earned enough for your old age.
Therefore, you should start ensuring a comfortable old age at a young age, especially if you are engaged in stock trading.
Unlike official employment, traders do not always use a scheme to legalize their income, which involves payments to a pension fund.
And even if you pay income tax to the state, this does not mean that you will receive payments when you retire.
What should a trader do if he doesn't have an official job and wants to take care of his future?
There are actually several ways to solve this problem:
Option 1 – Sole proprietor
On the one hand, this is the simplest option, but on the other, it's not the most profitable. You register as a sole proprietor and conduct your earnings on the exchange as business activity.
In this case, in addition to income tax, you will also have to pay contributions to the pension fund.
This option is quite viable, but the total amount of taxes and payments can be around 20%; the specific amount depends on the country you live in and the taxation method.
At the same time, any tax inspector may consider that you made an incorrect calculation and charge a fine.
Option 2 – Non-state pension insurance
Private insurance funds can be an alternative to state pension insurance. You contribute money to such a fund for a certain period of time, and the fund then pays you a pension for the agreed-upon period.
The main thing here is to calculate everything carefully and draw a conclusion on how profitable such an investment is.
Here are the numbers I got using one of those companies' pension calculators:
The monthly payment 833 or $10,000 per year, the payment period is 10 years, in total you will have to pay $ 100,000
After this, monthly pension payments will be 577 for 20 years, the total amount of payments is $577 x 12 x 20 = 138,408 .
Not bad at all: $100,000 will ultimately yield around 7% per annum. However, there are some downsides to choosing this option.
- Reliability of a non-state pension fund
- Will you live to be 80 if you retire at 60?
- Alternative investments can bring greater returns
Option 3 – Buy insurance experience
You have money now, but who knows what your circumstances will be like in 10 or 20 years? In some countries, you can buy the work experience you need to reach retirement age.
Depending on the country, the value of a year of work experience ranges from $1,000. For example, a minimum of 15 years of work experience is required to retire. You've worked for six years, so you're nine years short.
We go to the pension fund and pay 9,000 US dollars, or more precisely, the amount in your country's currency, and receive the missing years. Then we receive a pension of around 100 dollars for an indefinite period.
In my opinion, this is a rather attractive option, the main thing is to buy work experience when you have spare money, and not wait for difficult times.
Option 4 – Autonomous
In this case, you create your own investment portfolio, which will support you in old age.
However, this is one of the most challenging options, as you need to wisely select long-term investment objects that will not depreciate in value over 10, 20, or even 30 years.
When building my portfolio, I chose to invest in real estate, precious metals, and a dual-currency and cryptocurrency basket. I'm also considering securities.
From my experience, I can say that it is better to invest in commercial real estate and parking spaces than to buy residential real estate, in this case there are fewer problems with tenants.
When it comes to a bi-currency basket, it's advisable to keep your money not only in different currencies and banks, but also in different countries. This is the only way to fully protect yourself from surprises in these uncertain times.
When investing in precious metals, it's preferable to buy gold bars weighing 20-50 gam, which can be easily sold discreetly. It's best to store them in a safe deposit box.
For myself, I decided to use options 3 and 4, that is, to buy insurance experience and create my own investment portfolio. In this case, the pension will consist of two parts - investment and state.
