The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: GeekyGirl on July 01, 2016, 06:50:29 AM
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Hello,
Hubby (MrGeek) and I are looking for ways to optimize our tax rate. The income tax is applied after around 25% (depending on your role) taxes directly deducted by the employer (social security, retirement, unemployment, death insurance, solidarity contribution, invalidity insurance…).
For 2015, the rate for 1 part was:
• < 9700 € : 0 %
• 9700 € - 26 791 € : 14 %
• 26 791 € - 71 826 € : 30 %
• 71 826 € - 152 108 € : 41 %
• > 152 108 € : 45 %
A couple with two kids have 3 parts (0.5 part per kid, 0.25 if shared custody). We have 2.75 with my son and step-daughter (shared custody with her mom).
With 80K+, we’ll have some income taxed at 30%. We deduct 50% of childcare up to a certain amount but that’s all and in the best scenario, we’ll pay 5k+ of income taxes, that is 400+ per month and is 33% of my savings and 30% of MrGeek monthly savings. I want to reduce that by using the tax avoidance tools provided by the government
So I’ve been trying to convince MrGeek to invest some saving in a traditional retirement account (PERP, Plan Epargne Retraite Populaire) it is pre-tax like the 401K though the amount he can contribute is small (5k+, 15k+ if he uses the reserve for the last three years). He’s not convinced it is profitable. Mostly because the money is blocked until you’re 60. And the way they calculate it is complex with each installment giving you point that’ll determine what will be your rent. You won’t be able to freely dispose of your money but you’ll receive a rent for life. He already has a retirement account in his job and it is more flexible, the money is tax-free after 5 years and under certain circumstances (divorce, 3rd child …) even before with no penalty. The only caveat is that anything he put there is not tax-deductible; it’s mostly for the employer who put there some sort of profit sharing yearly. Another point if that everyone has ‘reasonable’ pension in France. MrGeek has worked for 15 years and will have contributed enough in 10 years to have a decent retirement between security social, an additional retirement vehicle for executive roles (‘retraite cadres’) and his enterprise retirement fund that’ll be tax-free.
Unless I work for now until I reach 65, I will have only the minimal pension and if I just work 10 years, I might not qualify for the additional pension for executives (‘retraite cadres’) though I’m contributing a large portion of my salary. So I am thinking of contributing some money to the standard retirement account (PERP) to reduce our taxes but as mention, the way the points are allocated and the rent determined is fuzzy and I was wondering if any of the French Mustachians on this forum is using it? Is-it worth the hassle?