Annuity or capital upon retirement?

Are you nearing retirement?

The question may seem "boaty", as we have read and heard so much on the subject. Ten different people will have ten ten different arguments.

You may be more tempted by capital, which generally represents a nice sum immediately available, or by annuity, because of the financial security it provides.

The known and commonly put forward objective arguments are as follows:

• Thanks to the capital, lower conversion rates, a lower tax burden (single exit tax) and the possibility of transmission to heirs.

• Thanks to the annuity, the sustainability of the lifestyle over time, ad vitam.

But is it that simple to answer this crucial question which commits you for the years remaining to live (i.e. more than 20 on average)?

To ask the question is to answer it. Your situation is unique and so is the answer about you. Your neighbor, your friend or even a colleague can opt for one or the other solution. Keep in mind that what suits him may not suit you.

Your choice commits you for life!

Also remember that the choice you make commits you for life. It is therefore a carefully considered response that is essential in any situation!

Some subtleties to know:

Before highlighting the other elements weighing in the balance, two small clarifications:

• The old age pension of 2^e pillar is not necessarily revalued according to inflation. In this respect, the LPP pension does not follow the same treatment as that of the AVS. This factor, often neglected in recent decades (fall in interest rates and low inflation) takes on its full meaning in this year which is experiencing a significant increase in price increases.

• Opting for capital means accepting the fact of consuming it year after year to ensure the financing of your liquidity needs. The investor profile and therefore the risks that you are able to insure will be key in this regard, given the significant volatility experienced by the different asset classes. Insurance alternatives exist for part of your assets, the fruit of a life of work, to provide you with security and sometimes also more or less significant tax savings.

What other factors require your attention?

• What is your family situation?

The answer might differ depending on whether you are alone, without dependent children, or married with children still of school age. Do you live together? Here too, specificities exist at the level of 2^e pillar that deserve your full attention.

• What is your health status?

You are in good health and the people in your family generally live a long life: prefer the annuity which is an interesting alternative insofar as it is paid throughout your life.

Is your health fragile? Life expectancy in your family does not exceed mortality tables? The capital option would generally make more sense.

• Would you like to insure it protection of your spouse?

In the event of death, the old age pension will give way to a lower widow/widower's pension, but paid for the remainder of your spouse's life. The other heirs do not receive capital in the event of “pre-death”.

Conversely, taking capital will give way to more flexibility in estate planning. The capital can thus be allocated by testamentary provisions to the surviving spouse.

• Are you from anxious nature?

Investing your pension capital or entrusting its management to a Bank is not easy. You will need to determine the right investment profile, choose the right partner(s) and, above all, you must then be able to remain disciplined in relation to the strategy put in place.

Emotions indeed play an important role in the stock market and the latter always falls faster than it rises, with the consequence that investors often “crack” at the worst time, thus locking in their losses and then moving towards a profile where the chances of recovering them will be much lower.

Conclusion

It is your heritage that serves your quality of life, not the opposite! In this sense the annuity option is often much more comfortable, because it perpetuates the lifestyle (at least much more than the capital option).

But the dimensions are multiple and involve a global analysis, in all the important aspects of a person's life, to arrive at an optimized decision that will commit you for the rest of your life!

Do not hesitate to contact us.