Preparing for retirement is a crucial topic, if not a major concern, for many. The goal is clear: supplement your income to secure your future. Why? In France, the average pension replacement rate is about 74% of the last salary. However, significant disparities exist, with 10% of retirees receiving only 54%. Therefore, saving for retirement is essential to ensure a sufficient standard of living. This brings up two key questions: what investment solutions are available to effectively prepare for retirement? And how much should you save each month?
Anticipation and Adaptation: Two Imperatives for Retirement Planning
To build sufficient savings by the time you retire, anticipation is key. The truth is, your retirement age impacts the amount of pension you receive and the savings effort required throughout your career. Retiring at 62 instead of 67 means you need to compensate for several years of unreceived income, which can translate to an estimated 30% increase in the investment needed to guarantee an equivalent standard of living.
It's therefore crucial to adapt your savings strategy based on your chosen retirement horizon. This means gradually increasing contributions to various investment vehicles and diversifying your placements—such as PER (Plan Épargne Retraite), PEA (Plan d’Épargne en Actions), SCPI (Société Civile de Placement Immobilier), life insurance, ETFs, and more.
But anticipating your retirement also means anticipating your future lifestyle! For example, an active urban life with hobbies and travel might require monthly income of €3,000 to €4,000, whereas a rural retirement in an already-owned primary residence would require fewer resources, almost half as much. And those who plan to travel regularly abroad during retirement will need to budget approximately €3,000 to €4,000 per month. Your desired standard of living directly influences the amount of capital you need to build.
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The Risk of Not Anticipating
The replacement rate—the ratio between your last active income and the pension received—is around 74% in France, with notable disparities, sometimes as low as 50%. This gap between income earned during your career and your retirement pension highlights the necessity of implementing a savings strategy as early as possible. The risk of a loss of purchasing power, or even precarity, is so significant for many retirees that saving for retirement becomes the vital solution. But what solutions are out there?
Different Types of Retirement Investments
There are many solutions and investment vehicles available to save for retirement.
Life Insurance: A Secure Savings Product
Life insurance is a cornerstone of savings in France. It consistently remains a favorite among savers. Flexible, tax-efficient, and transmissible, it broadly falls into two categories:
- Euro-denominated life insurance funds: The capital is guaranteed, but the returns are low, around 2.5%. When combined with fees and inflation, this can erode performance.
- Unit-linked (UC) life insurance: This type of contract integrates stocks, ETFs, or even SCPI shares. While the capital isn't guaranteed, returns can be three, four, or even more times higher than Euro-denominated funds.
An effective life insurance investment strategy involves allocating your portfolio between Euro-denominated funds and unit-linked options.
Good to know: Withdrawals made after eight years of holding a life insurance contract benefit from tax abatements: €4,600/year for a single person or €9,200/year for a couple, with social contributions at 17.2%.
The Retirement Savings Plan (PER)
Introduced by the PACTE law, the PER replaced the PERP. Investing in a PER allows you to include investment vehicles identical to those in life insurance (Euro funds, UCs, ETFs, SCPIs), offering similar returns. The main advantages of the PER? Contributions are deductible from your taxable income (up to 10% of income). The PER also offers flexible withdrawal options: either as an annuity, as a lump sum, or a mixed option of both.
Real Estate for Retirement: The Case of SCPIs
Alongside direct real estate investment, placements in SCPIs (Real Estate Investment Companies) are an effective solution for retirement savings. These allow you to invest in rental property through shares. This type of investment is particularly interesting as a complement to life insurance or a PER, with potential returns of 4% to 5%.
The PEA (Equity Savings Plan)
The PEA (Plan d’Épargne en Actions) allows you to invest in French and European stocks. It relies on the fluctuations of stock markets, offering the potential for significant growth over a long period. Another benefit is the tax exemption on gains after a holding period of 5 years.
Green Investment Products, ISR Labeled, for Retirement Savings
Alongside traditional products, new types of green and sustainable labeled investments are emerging. They offer a significant advantage: combining returns with a positive environmental impact.
ISR Life Insurance
Life insurance is now also serving the planet. Many contracts offer unit-linked options labeled ISR (Socially Responsible Investment) or Greenfin, or even funds incorporating green ETFs or sustainable SCPIs. These vehicles select companies based on extra-financial criteria—ESG (Environmental, Social, Governance)—with the goal of prioritizing virtuous economic models. The result? A dual benefit: potentially attractive returns within a tax-advantaged framework, and a measurable environmental impact.
The ISR PER: Preparing for Retirement While Preserving the Environment
The ISR PER is appealing due to its ability to generate significant returns—over 9% for some of them—while directing savings towards ISR-labeled funds or ETFs. Selected funds can exclude CO2-emitting sectors or focus on those aligned with climate agreements. The tax benefits are also attractive, as amounts paid are deductible from taxable income. Platforms like Goodvest or Avenue des Investisseurs offer ISR PERs.
Green ETFs and Green Bonds: Preparing for Retirement by Investing in Responsible Assets
Long reserved for seasoned investors, ETFs (Exchange Traded Funds) are now becoming accessible to the general public. Many of these trackers, which replicate stock market indices, now integrate ESG filters. As a result, green ETFs offer a simple, low-cost way to invest in impactful companies. Another burgeoning option is green bonds, which directly finance sustainable projects—renewable energy, energy renovation, green infrastructure, etc.
Green SCPIs: Eco-Responsible "Paper Real Estate"
The building sector in France accounts for nearly 40% of annual energy consumption and 23% of greenhouse gas emissions. ISR-labeled real estate investment vehicles therefore have a major role to play in the energy transition. It's with this in mind that some SCPIs now specialize in high-environmental-value projects: positive-energy buildings, thermal renovations, energy improvements, and more. These so-called green SCPIs allow you to save for retirement by participating in the creation of the city of tomorrow: the sustainable city.
Sustainable Real Estate Crowdfunding
With returns often exceeding 8%, sustainable real estate crowdfunding allows you to prepare for retirement while having a positive impact on the environment and society. Homunity, Raizers, and Enerfip are among the most prominent platforms.
Homaio and its Carbon Quota Market Solution
The carbon quota market has become a central tool in the energy transition. It imposes a cap on CO2 emissions for companies. These quotas effectively incentivize a gradual reduction in CO2. While long reserved for large corporations, this market is now opening up to individuals through platforms like Homaio. Homaio offers financial products backed by emission allowances that are retired from the market once purchased, ensuring a real reduction in emissions. This approach allows investors to transform their savings into direct climate action.
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Different Savings Strategies Based on Age
While preparing for retirement as early as possible remains the ideal solution, as long-term returns will be maximized, it's certainly possible to save at every major stage of your life.
From 25-35 Years Old: Entering Working Life and (Already) Preparing for Retirement
Goal: Ideally invest 10-15% of your income.
Prioritize: Dynamic assets (UCs, ETFs) labeled ESG.
Diversify: Your portfolio across stocks, SCPIs, and ISR funds. The compounding effect is maximized when you start investing early.
35-45 Years Old: Consolidate and Grow
Increase: Contributions (ideally 15-20% of income).
Integrate: New investment vehicles, such as SCPIs or ISR PEAs.
Adapt: Your portfolio based on your risk tolerance. For example, allocate your ISR life insurance between Euro funds and unit-linked options.
45-55 Years Old: Accelerate
Increase: Contributions even further.
After 55 Years Old: Secure
Re-focus: Potentially shift your investments towards products with lower returns but that preserve capital, such as Euro funds or green bonds. Plan: Annuity or lump sum withdrawals at maturity.
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Common Mistakes When Saving for Retirement
- Underestimating fees for certain products: For investments like PER and life insurance, management fees can be so high that they diminish profitability.
- Forgetting withdrawal taxation: A premature withdrawal, for example, before eight years for life insurance, can lead to increased taxation.
- Not accurately estimating your entitlements: A missing quarter of contributions can result in a reduction in your pension amount or delay your retirement. It's therefore essential to validate all acquired rights and retain all supporting documents.
In Summary: How to Save for Retirement – Our Recommendations
- Start early to maximize the power of compound interest.
- Diversify your investment vehicles, favoring ESG-labeled investment products (life insurance, PER, PEA, carbon quota market, sustainable real estate crowdfunding, ISR SCPIs).
- Periodically monitor your plan (annually or semi-annually) to adjust your strategy based on age, goals, and the economic context.
- Seek guidance from an advisor to refine your strategy.
In essence, preparing for retirement requires developing and orchestrating a comprehensive and diversified strategy. By allocating your investment across several types of assets and focusing on responsible savings products, you'll achieve a dual benefit: the potential for high returns and active participation in the global energy transition. Integrating innovative solutions like Homaio into your portfolio not only helps accumulate capital for retirement but also actively contributes to ecological transition.
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