Hey Bogle buddies,
This is my second post here. I discovered the forum after reading the Bogleheads’ books and a couple of books by John Bogle. I really resonate with his philosophy, and my portfolio follows a similar strategy.
I have a question about the bond portion of my portfolio. I live in Portugal, and here we have pension funds with tax benefits. It is an active managed fund, and allocates 30% to stocks and 70% to bonds (mostly European bonds). I use it as my bond exposure, but I’m wondering if I should stick with it or switch to bond ETFs.
In a previous post, I shared some calculations with the help of @jg12345, but they weren’t very specific regarding the bond portion of my portfolio. So, I’m back to hear not only @jg12345’s thoughts but also insights from the rest of you with more experience in this area.
- I am 35 years old, aiming my retirement to 65-67 years old;
- Investing in € through assets traded in European markets;
- Monthly investment through "DCA": 500€ / month;
- 75% stocks + 25% bonds Portfolio;
Here are the key details of the Pension Fund:
•https://www.morningstar.pt/pt/funds/sna ... F0GBR057ZA
•Allocation: 30% stocks (split between Europe and the US), 70% bonds (mostly Europe).
•Performance: Annualized return of 6.1% since 2001.
•Fees: TER of 1.58% per year.
•Tax Benefits: I get a 20% tax deduction on my annual investments (up to €2,000), meaning a max €400 deduction per year in IRS. During retirement, the withdrawals are taxed at 8% instead of 19,6%.
From my perspective, it seems fine to keep using the pension fund, mainly due to the psychological factor of paying less in taxes at the end of the year in IRS, as I’ve always had to pay in recent years.
But I’m worried I might be overlooking something. Would it make more sense to move to bond ETFs instead?
I ran some numbers to compare my pension fund with other options. Here’s the scenario:
•Annual investment: €2,000
•Annual return (for both, to be fair): 3%
•Duration: 30 years
- Pension Fund Option 1:
•Net return: 88,156€
•Re-investing the 400€ / yr fiscal benefit
•TER: 1.58% per year
•Tax rate: 8%
- Pension Fund Option 2:
•Net return: 73,464€ + 12,000€ (400€ x 30 yr)
•NOT re-investing the 400€ / yr fiscal benefit
•TER: 1.58% per year
•Tax rate: 8%
- iShares Core Global Aggregate Bond UCITS ETF USD Hedged (Acc)
•Net return: 89.177€
•TER: 0.10% per year
•Tax rate: 19,6%
I’d appreciate your thoughts!
Many thanks in advance!
This is my second post here. I discovered the forum after reading the Bogleheads’ books and a couple of books by John Bogle. I really resonate with his philosophy, and my portfolio follows a similar strategy.
I have a question about the bond portion of my portfolio. I live in Portugal, and here we have pension funds with tax benefits. It is an active managed fund, and allocates 30% to stocks and 70% to bonds (mostly European bonds). I use it as my bond exposure, but I’m wondering if I should stick with it or switch to bond ETFs.
In a previous post, I shared some calculations with the help of @jg12345, but they weren’t very specific regarding the bond portion of my portfolio. So, I’m back to hear not only @jg12345’s thoughts but also insights from the rest of you with more experience in this area.
- I am 35 years old, aiming my retirement to 65-67 years old;
- Investing in € through assets traded in European markets;
- Monthly investment through "DCA": 500€ / month;
- 75% stocks + 25% bonds Portfolio;
Here are the key details of the Pension Fund:
•https://www.morningstar.pt/pt/funds/sna ... F0GBR057ZA
•Allocation: 30% stocks (split between Europe and the US), 70% bonds (mostly Europe).
•Performance: Annualized return of 6.1% since 2001.
•Fees: TER of 1.58% per year.
•Tax Benefits: I get a 20% tax deduction on my annual investments (up to €2,000), meaning a max €400 deduction per year in IRS. During retirement, the withdrawals are taxed at 8% instead of 19,6%.
From my perspective, it seems fine to keep using the pension fund, mainly due to the psychological factor of paying less in taxes at the end of the year in IRS, as I’ve always had to pay in recent years.
But I’m worried I might be overlooking something. Would it make more sense to move to bond ETFs instead?
I ran some numbers to compare my pension fund with other options. Here’s the scenario:
•Annual investment: €2,000
•Annual return (for both, to be fair): 3%
•Duration: 30 years
- Pension Fund Option 1:
•Net return: 88,156€
•Re-investing the 400€ / yr fiscal benefit
•TER: 1.58% per year
•Tax rate: 8%
- Pension Fund Option 2:
•Net return: 73,464€ + 12,000€ (400€ x 30 yr)
•NOT re-investing the 400€ / yr fiscal benefit
•TER: 1.58% per year
•Tax rate: 8%
- iShares Core Global Aggregate Bond UCITS ETF USD Hedged (Acc)
•Net return: 89.177€
•TER: 0.10% per year
•Tax rate: 19,6%
I’d appreciate your thoughts!
Many thanks in advance!
Statistics: Posted by bomfimpt — Sat Dec 07, 2024 7:36 am — Replies 2 — Views 56