The basis of a good wealth strategy, life insurance makes it possible to meet many of the objectives of savers. Ideal for building up capital at your own pace and making it grow, it can also be considered as a retirement savings product or as a tool for transmitting your assets.
When to open a life insurance contract: set the date!
Life insurance allows you to “take a date”. What does this mean exactly? It’s about starting to run your contract in order to benefit from attractive taxation when you withdraw your money.
After eight years , for example, the final withholding tax rate on the interest generated is no more than 7.5%. You will also have to pay social security contributions at the rate of 17.2%. An example: you have invested €1,000 in a life insurance contract and after eight years, this contract is worth €1,800. You will only be taxed on the capital gain of €800.
How does a life insurance contract work?
The key word in life insurance and how it works could be flexibility . Life insurance is a savings product that offers great flexibility at the time of subscription. Some contracts can be taken out with a minimum investment of €1,000. You also have the option of making additional payments with a low savings capacity: €100 per month may be enough.
You can also modulate these payments according to the rhythm of your life. For example, you have an increase, you can absolutely increase these payments. On the contrary, if you encounter difficulties, you can reduce them.
Life insurance: is your money blocked? It is a received idea.
No, your investment is not “blocked” for x years… It is possible to recover its funds at any time , whether it is the savings you have placed there or the potential interest it has generated. Life insurance can therefore be considered to build up precautionary savings, available in the event of a hard blow, just as it can be an investment solution for a further investment objective such as the purchase of your main residence.
Funds in euros or units of account? These very different supports are now accessible to any modern multi-support life insurance contract.
Euro funds are low risk and capital guaranteed, but generally offer lower returns. On the contrary, units of account do not guarantee your capital but offer more attractive return prospects. They are backed by various asset classes (equities, bonds, venture capital, real estate, etc.), which will allow you to invest in several sectors of activity or geographical areas.
The diversity of risk levels available in the unit-linked catalogs will also allow you to diversify your investments, depending on your objectives, your risk tolerance and your investment horizon.
Namely: most insurers offer “profiled” management options in their life insurance contracts, allowing predetermined risk management according to the saver’s temperament (prudent, balanced, dynamic management, etc.).
Why prepare for retirement with life insurance?
A capital outflow
Most life insurance contracts do not have a limited duration. The term of the contract then depends on the subscriber alone, who can untie it at any time and thus recover his money. We then speak of redemption. In the majority of current contracts, this release of account savings can be done in one go or several times. Another solution is scheduled withdrawals: each month, the scheduled amount arrives in the insured’s bank account.
An annuity outing
You can also convert your capital into an annuity. This is the solution chosen by policyholders who wish to recover their money in the form of payments until the end of their life – we then speak of a life annuity – or for a period fixed in advance – we then speak of a temporary annuity. .
In practice, the amount of the annuity is calculated using mortality tables, therefore according to the life expectancy of the person concerned and, of course, the amount of capital in the account. At the tax level, it is not the interest generated by the invested capital that is taxable, but the annuity itself, on a fraction of its amount, which varies according to the age reached by the insured when this annuity is paid.
Life insurance is also a privileged instrument for anticipating one’s succession . The insured can designate the person of his choice as the beneficiary of his contract. On his death, the capital of his life insurance contract will revert to the beneficiary without entering into the total amount of the estate. He will thus escape the rights deriving therefrom.
The beneficiary will have nothing to pay up to €152,500 of death benefit received. Beyond that, he will be subject to a flat tax of 20% for the net fraction less than or equal to €700,000 and 31.25% for payments made before age 70.
Note: if you fund your contract after 70 years, the part of your payments that exceeds 30,500 euros will be subject to inheritance tax.
