How to optimize your vested benefits account withdrawal to save on taxes?

By carefully planning, you can reduce your tax burden and make the most of your retirement savings.

In this article, we will explore strategies to effectively manage the withdrawal of your 2nd pillar. You will learn how to assess your financial situation, the advantages of phased retirement, and tips for minimizing your taxes. We will also address risk management related to the withdrawal and provide personalized advice based on your profile. With this information, you will be better equipped to make informed decisions about your financial future.

Assessing your financial situation

To optimize the withdrawal of your vested benefits account, you must first carefully assess your financial situation. This step is crucial for making informed decisions about your financial future.

Analysis of your pension assets

Start by taking stock of all your pension assets. This includes your 2nd pillar, your vested benefits accounts, and your 3rd pillar. If you have changed jobs several times, you may have scattered assets. Consider conducting a search with Kala to recover any forgotten assets. Keep your insurance certificates safe and inform your pension institutions of any address changes.

Estimating your future needs

Evaluate your future financial needs, considering your desired lifestyle in retirement. The 2nd pillar, combined with the 1st pillar, should cover about 60% of your last income. Think about the possibility of phased or early retirement, which could influence your capital needs.

Considering your family situation

Your family situation plays an important role in retirement planning. If you are married or in a registered partnership, be aware that in the event of divorce, you will need to share half of the vested benefits accrued during the marriage. Additionally, in the event of death, your vested benefits will be paid to your beneficiaries according to a legal succession order.

Phased withdrawal strategies

Multi-year planning

To optimize the withdrawal of your vested benefits account, you can adopt a phased withdrawal strategy. This approach allows you to spread your pension assets over different tax years, thus reducing your tax burden. In some circumstances, you have the option to transfer your exit assets to two separate vested benefits foundations. This gives you the opportunity to receive your assets in different years, which usually results in lower taxation than if you withdraw everything at once.

Combining with other sources of income

It is advisable to examine your overall financial situation when planning your withdrawals. You can combine the withdrawal of your vested benefits account with other income sources, such as phased retirement or a pension. This approach allows you to maintain a stable standard of living while optimizing your tax situation. Remember that you can receive assets placed with a vested benefits foundation as early as five years before reaching the official retirement age, and in some cases, defer the payment until age 70.

Adapting to tax changes

Tax laws change, and it is important to stay compliant. The capital withdrawal from a vested benefits account is subject to a preferential tax rate, more advantageous than ordinary income tax. However, the rules may change. It is therefore recommended to stay informed about legislative changes and regularly review your withdrawal and tax planning. Do not hesitate to consult an expert to review your personal situation and discover opportunities in the current tax context.

Tax optimization according to your profile

Employees nearing the end of their career

To optimize your vested benefits account withdrawal, you can spread your assets over several tax years. This strategy allows you to significantly reduce your tax burden. Indeed, the higher the withdrawals in a single year, the higher the tax rate. It is therefore advisable to spread your pension assets across different foundations. This way, you can receive them in different years, reducing tax progression.

Entrepreneurs

As an entrepreneur, you have the option to choose the capital withdrawal tax, which is generally lower than income tax. To take full advantage, increase your insured salary and pension contributions in time. This gives you more flexibility for voluntary buy-ins, which are deductible from taxable income. The taxes on the withdrawal will then be significantly lower.

Early retirees

If you retire early, you can receive your vested benefits up to five years before the official AVS retirement age. Conversely, you can defer the withdrawal for five years if the foundation’s regulations allow it. This flexibility allows you to adapt your tax strategy to your situation. Remember that people who continue to work beyond the official retirement age can defer the withdrawal of their 3rd pillar, but must do so no later than age 70.

Managing risks related to withdrawal

Protection against inflation

To protect your savings from inflation, it may be wise to invest your vested benefits in securities. This approach offers the possibility of achieving additional long-term returns. In a low-interest environment, vested benefits accounts currently offer a near-zero interest rate. On the other hand, investing in securities can generate higher returns, although the value of the assets may fluctuate.