This Sunday is the penultimate one before the deadline for submitting the Income Tax Return (IR). Those who complete the declaration and receive taxed income can use, at this time, a benefit and pay less tax or even receive a refund. It is the benefit that comes from the application in the previous year in pension products of the PGBL type. If you didn’t apply last year, you can start this year. But, which is better, apply monthly or concentrate the contribution at the end of the year?
Individuals who receive taxed income and file a full statement have a benefit they shouldn’t be wasting. These should contribute 12% of their gross taxable income into a PGBL-type pension plan.
Those who do not do this and justify that they cannot, will pay a higher price in the future. I explain the reason.
There are four advantages to applying 12% of your taxed income to PGBL-type pension plans.
First, this attitude helps you form the habit of investing and thus plan for a more comfortable retirement.
The second justification is that this habit promotes an increase in their income. Yes, your income increases as you apply. I’m gonna explain.
If you did not apply for a PGBL, you would pay 27.5% of IR on this 12% portion of your salary. Let’s assume that last year your taxed income was R$100,000. Thus, 12% of your income is equivalent to R$12 thousand. This means that if you do not apply in a PGBL you would pay the Federal Revenue R$ 3.3 thousand now on this installment.
However, if you apply for a PGBL, you defer this payment and earn income on this amount that can equal your entire salary from last year. See how.
The Selic rate is currently at 12.75% per year. This means that in 28 years, keeping these R$3,300 invested, you will have a value of R$107,000. Therefore, the IR you would pay now could generate you all the salary you earned last year. So, which do you prefer, paying BRL 3,300 now or earning BRL 107,000 in 28 years?
The third advantage is paying a lower income tax rate on the same income. You can pay an income tax rate of 27.5% today, or apply in a PGBL and pay only 10% in ten years.
Finally, the pension plan facilitates the process in the event of succession, avoiding the headache and inventory costs.
Considering all these advantages, the doubt between applying periodically or concentrating the entire contribution to private pensions at the end of the year seems almost obvious.
Just answer the following question: does it make sense to take the risk of missing out on these four benefits?
I do not think so.
Those who leave it for the end of the year to apply, run two risks. The one of being involved with the end-of-year expenses and not having 12% of the income for the whole year or forgetting the contribution. Remember, your forgetfulness can be worth a fortune in 28 years.
The monthly contribution represents a smaller sacrifice and, therefore, more indicated.
So, plan your budget now and fit the investment schedule of 12% of your income, monthly, into a PGBL-type product.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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