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 does not work in an official job and wants to take care of his future?
In fact, there are several ways to solve this problem:
Option 1 – Individual entrepreneur
On the one hand, this is the simplest option, on the other, not the most profitable. You register as an individual entrepreneur and earn money on the stock exchange as a business activity.
In this case, in addition to income tax, you will also need to pay contributions to the pension fund.
The option is quite workable, but the amount of taxes and payments can be about 20%, the specific amount depends on the country in which you live and the method of taxation.
At the same time, any tax inspector may consider that you did not make the calculation correctly and assess a fine.
Option 2 – Non-state pension insurance
An alternative to state pension insurance can be private insurance funds. That is, you transfer money to such a fund for a certain amount of time, and after that the fund pays you a pension during the contractual period.
The main thing here is to calculate everything well and draw a conclusion about how profitable such an investment is.
Here are the numbers I came up with using one of these companies' retirement calculator:
Monthly payment 833 or $10,000 per year, payment term is 10 years, for a total of $ 100,000
After that, 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; an amount of $100,000 will ultimately yield about 7% per annum. True, there are also negative aspects when 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
Now you have money, but who knows what circumstances will be like in 10-20 years? In some countries, you can buy work experience that is not enough until retirement.
Depending on the country, the cost of a year of work experience ranges from 1000 US dollars; for example, a minimum of 15 years of work experience is required to retire. At one time you worked for 6 years and you are missing 9 insurance years.
We go to the pension fund and pay 9,000 US dollars, or rather the amount in the currency of your country, and get the missing years. And then we receive a pension of around $100 for an indefinite period of time.
In my opinion, this is a rather attractive option, the main thing is to buy the internship when you have free money, and not wait for difficult times.
Option 4 – Autonomous
In this case, you independently create your own investment portfolio, which will feed you in old age.
But at the same time, this is one of the most difficult options, since you need to wisely select long-term investment objects that will not depreciate in 10, 20 or even 30 years.
When forming my portfolio, I chose investments in real estate, precious metals, and the creation of a dual-currency and cryptocurrency basket. I’m also thinking about choosing 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.
If we talk about the dual-currency basket, then it is advisable to store money not only in different currencies and banks, but also in different countries, this is the only way to completely protect yourself from surprises in our troubled times.
In the case of investments in precious metals, it is preferable to buy gold bars weighing 20-50 gams, which can be easily sold afterwards without attracting attention. It is advisable to store them in a safe deposit box.
For myself, I decided to use options 3 and 4, that is, buy insurance coverage and create my own investment portfolio, in this case the pension will consist of two parts - investment and state.