Always stay calm when investing for long periods – especially during weak stock markets. (Photo: © iStock | kzenon)
Read aloud:
What is good for business assets is also suitable for your own retirement provision.
Business owners who want to build private wealth and provide for their retirement should also involve their families. There are solutions for almost every situation, every investor profile, every investment goal, and every investment horizon.
How was that again? Federal Labor Minister Hubertus Heil wanted to present a "Law on the Inclusion of the Self-Employed in the Pension System" by the end of 2019. In plain language, this means that self-employed and freelancers should also be included in retirement savings. As early as 2019, an OECD study pointed out that, due to the lack of compulsory statutory pension insurance for the self-employed, their retirement provision was incomplete – and even then, this was nothing new. Heil's draft was delayed, then the coronavirus pandemic struck, and now, in the summer of 2021, Germany is facing federal elections, and the law will be passed in the next legislative period. Perhaps.
For sole proprietors, this means they must take retirement planning into their own hands, even if they have a foundation in statutory pension insurance – the first pillar of retirement provision – through voluntary contributions. The second pillar, company pension provision (bAV), is reserved for the managing directors of a limited liability company (GmbH). This leaves all other self-employed individuals with the third pillar, private retirement provision.
The first step is an analysis, which includes the business side: What is my financial situation, what life goals am I pursuing, and how much capital can I invest in wealth accumulation and future retirement planning? An important question is whether the business owner prefers to pursue a security-oriented or opportunity-oriented approach to retirement planning. And above all: How long will it be until retirement age? Will it be 15, 20, or even 30 years, or even less than five? The options and thus the strategies change depending on the timeframe.
The most options are available for a period of more than 15 years. Over such periods, promising sums can be saved – naturally also depending on the amount available each month for retirement. Securities accounts or fund savings plans should be the focus, as contributions can be flexibly adjusted. It is also worthwhile to invest in a fund portfolio rather than a single fund. This portfolio can be compiled from a wide variety of asset classes, such as equity, bond, or precious metal funds – and can always be adjusted to your own risk-reward profile. Portfolios with a strong focus on opportunities offer higher returns, but the risk of loss of value during weak market phases is also increased.
Another advantage of investment funds is that larger sums can be paid in at any time. If a life insurance policy matures or an inheritance brings the self-employed person an increase in assets, this can be added to the portfolio. Ultimately, this approach can provide the self-employed with a higher and more flexible retirement provision than if they were included under the statutory pension insurance umbrella.
If a self-employed person sets aside €100 over a period of 20 years, they will have €24.000 at their disposal—but no more. However, if they choose to invest in funds that invest in stocks, for example, their chances of capital growth increase.
Poor performance Due to a weak performance of -2 percent per year, the assets amount to approximately 18.800 euros after 20 years
An average return of 3 percent per year has been achieved after 20 years. The assets then amount to approximately €31.200.
A very good performance. After 20 years, the investment has grown by 6 percent per year. The assets then amount to approximately €43.300.
Further information on private retirement savings can be found here.
Would you like advice on your business assets or private investment goals? Then arrange an appointment with the experts at SIGNAL IDUNA Asset Management at: www.si-am.de/handwerk
VH Kiosk: Download the entire digital magazine "Investing business assets in a contemporary way" now for free in the VH Kiosk or access it here.
IMPORTANT NOTE:The scenarios are based on assumed performance based on past values. However, future performance cannot be precisely determined. Depending on how the securities markets develop, the fund results may be higher or lower. Tax aspects are also not taken into account in the example calculations. The costs of a securities account may reduce returns. These non-binding example calculations do not constitute investment advice and do not replace it.
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