1. Have you begun yet?
This isn’t really a question, in the sense that your answer doesn’t matter. Because--unless you’re already retired--it’s never too late to start.
Still, sprung with a question about one particular age, Claudia Halmes-Coumont, director of insurer La Luxembourgeoise-Vie, responds--a bit wryly--“40 is already late.”
“Not too late!” she quickly adds. “But it’s better to start very early.”
People are tempted to put off investing in their retirement because it’s far away. “But,” points out Pierre Blanchet, head of retail investment solutions at Amundi, “the earlier you start investing, the less you’ll have to save.”
It’s also a myth, Blanchet continues, that you have to be rich to invest. “In reality,” he says, “with regular payments, even of small amounts, and thanks to the power of compound interest, it is perfectly possible to achieve your financial goals.”
“When it comes to investing, time is a precious ally,” he says. He’s still talking about compound interest: “the interest generated by our investments has a snowball effect throughout our lives, and its impact can be considerable. Indeed, interest itself generates interest.”
Imagine you’re 30 years old, says Marc Hengen, managing director of Luxembourg’s professional association of insurers and reinsurers (Aca). Maybe you can afford to put aside €100 a month. And why shouldn’t you? People might not realise, he says, that it’s flexible: “If, three years later, for any reason you can’t save that money anymore, you can always change [your scheme]. You’re not bound by the contract to pay hundreds a month.”
2. What’s your investment strategy?
You have some options when it comes to insurance products: there are fixed products with guaranteed yields, and there are more variable products (funds) where you can choose the underlying assets.
Blanchet explains that your investment strategy should be informed by how far away your retirement is. Are we talking a decade? Two? Three?
“If you’re investing in the long-term,” says Halmes-Coumont, “it’s very important to invest in the capital markets. The returns are much more interesting.” It amounts to a risk question: the younger you are when you start, the more risk you can take on, so investing in funds is probably better. If there is a crisis, you’ll have time afterwards to recover or change strategies.
But when you get into your 50s, says the LaLux director, it’s time to adjust your investments so that they’re safer. In other words, start putting more of it into plans with guaranteed yields.
3. How much do you need?
“It’s essential to define the capital to be built up,” says Blanchet, “which will supplement the pension received from the general scheme. Will you need to supplement your income if your basic pension proves insufficient to maintain your standard of living?” This implies an exploration of things like your future daily expenses, how much travelling and splurging you’ll want to do, how expensive your hobbies are where you want to retire.
4. Does your employer offer a supplementary pension scheme?
No matter your answers to any of the above, a good place to begin, according to Halmes-Coumont, is here: check if your employer offers a supplementary pension plan. If so, sign yourself up. You can pay into it at a maximum of €1,200 per year (so €100 per month). “It’s a very interesting vehicle,” says the LaLux director, noting that it comes with some good tax breaks.
Such a scheme (which falls under the second pillar of the pension system) is not a quite savings account but rather a special pension pot, where your employer contributes and you can as well. As a bonus, the scheme covers death and disability as well as retirement.
Being part of this kind of scheme is increasingly important, says the LaLux expert, given that the first pillar of the pension system--public contributions--is currently under the chopping block of reforms and is certain to be reduced in the coming years. (If not now, she says, then within the next 15 years.)
As of late 2024, some 2,200 companies in Luxembourg offered supplementary pension schemes (covering around 70,000 employees). Unfortunately, that means that not everybody has this option. “If not,” says Halmes-Coumont, “you can always ask your employer to install one.”
5. Self-employed people, have you made your own plan?
If you employ yourself, you’re not left out: instead of a scheme capped at €1,200 per year, you can rig your own plan and pay up to 20% of your annual revenue into it.
6. Have you thought about tax?
“It’s important to consider the tax implications,” says Blanchet.
“There are some tax measures in place,” agrees Hengen, “if you pay for retirement.” He notes that you can deduct your premiums from your taxable income and that when the benefits get paid out they are not fully taxed as revenue. “So you have advantages at the entrance and at the exit.”
For instance, for the supplementary pension scheme outlined above, you don’t pay any tax on it now--when you’re paying into it--and when you eventually cash out, Halmes-Coumont explains, the only part you’ll pay is a 1.4% dependency contribution.
7. Do you have a private insurance contract?
This would be the third pillar of the pensions system: if you pay income tax in Luxembourg, you can take out an insurance contract with a premium of €3,200 per year and which is fully deductible from your taxes. The contract must be for a minimum of one decade and be payable when you’re between 60 and 75 years old. When you cash out, the capital is taxable at half the rate of your average tax percentage.
8. Are you diversifying your investments?
“The watchword for effective retirement planning is diversification,” says Blanchet. “It’s essential never to forget this fundamental principle: ‘you shouldn’t put all your eggs in one basket.’”
9. Are you doing everything you can do ensure your financial security?
For retirees, financial security is everything. Blanchet has some extra advice: “You can increase your financial security by owning your principal residence so that you don’t have to pay rent when you retire.” Though don’t forget, he adds, to budget for the upkeep of this property.
It’s also important, he says, to have a proportion of your investments in cash. “This means gradually reducing the risky part of your investments, while keeping another portion in medium-term investments to maintain a satisfactory return.”
10. Are you going to retire in Luxembourg or elsewhere?
If you’re planning to move away, you will need to cash out of your pension schemes before you go. It’s therefore a good idea, says Halmes-Coumont, to look at the double tax treaty between the two countries (Luxembourg and your destination). This is important because the treaty will determine where you have to pay tax on the three pillars (public, employer, private) of pensions.
“It’s well-regulated with our neighbouring countries,” she adds, “but for other countries you’ll have to look.”
For the rest…
“People think it’s extremely complicated,” says Hengen of investing in your retirement. Sure, there are lots of questions to ask. Maybe it is a little complicated. What if you’re feeling overwhelmed? “Get yourself advised,” he says, plainly. “Insurance companies and their intermediaries are specialised in this area and it doesn’t cost anything. If you just get advice, you are not forced to buy anything.”
This article was written for the to the of Paperjam magazine, published on 26 February 2025. The content of the magazine is produced exclusively for the magazine. It is published on the website as a contribution to the complete Paperjam archive. .
Is your company a member of the Paperjam Business Club? You can request a subscription in your name. Let us know via .