How many years will it take to double your savings without risk?

Except in the case of political or financial surprises, the Livret A rate will remain at 1% throughout 2022. It is not well understood. At this rate, it still takes 70 years to double the capital … in the case of LEP it’s only 32 years! What about other risk-free investments?

Would you like to double your savings by depositing it in an investment that guarantees that you will always get your stock back? Even if mirages, 2022, rebounds such as the Livret A rate, obviously shortened the period. So why look at the number of years needed to double capital in a very theoretical scenario of maintaining interest rates at current levels? This “fictitious calculation” allows you to compare performance in a more specific way than a very low percentage. simulation. Compare the five products owned by the largest segment of the population, Livret A, life insurance, LDDS, home savings plans and popular savings accounts.

Booklet A and LDDS: Takeoff of Addiction

1% is better than 0.5%. That’s double! In fact, the Livret A rate rebound, and the LDDS rebound that automatically displays the same rate, is good news for French people who prefer these booklets for preventative savings. However, inflation at the end of 2021 was 2.8% and INSEE forecasts a peak of 3.4% in June 2022, so it will not be possible to increase money at the same rate as consumer prices soar.

With Livret A or LDDS, the 1% rate of return is exempt from all taxes.Despite the recent increase, taking into account the capitalization of interest, annual compensation is added to the capital and new interest is generated, but it is still needed 70 years to double the savings deposited in Livret A at current rates.. – Present – ​​As long as it is the reign of Queen Elizabeth II! But it’s still much better than last year. MoneyVox calculated a period of 139 years and doubled the savings at the old rate of 0.5%.

Livret A received reward at 1% capital
at first 10,000 euros
After five years € 10,510
… 10 years 11,046 euros
… 20 years € 12,202
… 70 years € 20,067
… 100 years 27,048 euros

The simulation detailed in the table above is based on the following principles: Deposit 10,000 euros at 1%Then make these savings “function” without withdrawing or depositing anything. And start with a completely theoretical hypothesis of keeping the rate at 1% for almost a century …

Its weakness : With support adapted to preventative savings (2-3 months income), Livret A (like Livret de développementrestainanceetsolidaire (LDDS)) cannot increase capital in the long run.

How much interest do you have in Livret A for € 1,000, 1, 2, 5, 10 and 20 years?

Over 1,000 years in bank books!

Do Livret A rewards seem weak to you? Compared to the average 0.09% of “classic” bank books, the Livret A rate is a bargain. Considering taxation (single lump sum payment or 30% flat tax), Double the savings of a “classic” passbook with a total income of 0.09% 1,111 years.. ..

Also, this average rate of 0.09% calculated by the Bank of France takes into account promotion rates … Excluding one-time bonuses, Classic Bank’s books have an average of 0.05% gross, or post-flat tax. It will be 0.035%.At this rate you will need it very accurately 2,000 years To double your savings!

Life insurance: 66 years with a euro-denominated fund

By definition, it is impossible to know the return of funds in the euro over the next few years, and even decades.Let’s take a look at the final reference rate: Average rate of return calculated by insurance regulator ACPR 1.28% For 2020, we know that 2021 earnings are generally stable. The social security contribution (currently 17.2%), which is deducted annually from the interest of the Euro Fund, must be deducted.

At this rate, it will take more than half a century to double your wealth! 66 years oldMore precisely, the time it took for the Voyager 1 and 2 spacecraft to leave the solar system …

Euro funds at average rate * capital
After five years € 10,541
… 10 years 11,112 euros
… 20 years € 12,347
… 30 years 13,720 euros
… 66 years old € 20,053

* According to ACPR, 1.28% after management costs in 2020, net amount after annual social security burden is about 1.06% (17.2%)

Its weakness : Euro-denominated life insurance funds are on an irreparable downtrend. Until when? I can’t answer. Even if the 2021 returns aren’t “bad” than expected, it’s now difficult to get “good” long-term performance without partially betting on unit-linked products.

List of 2021 rates for life insurance

Retirement: Save money by paying less taxes.. Compare 11 contracts

PEL: 40 years old, 100 years new

Are you one of the lucky ones who opened a home savings plan before March 2011? Double jackpot! On the one hand, PEL is part of the old generation plan and has no maximum life span (up to 15 years from March 2011). On the other hand, a 2.5% contract rate is guaranteed for the entire life of the product.

Indeed, the social security contributions deducted each year from PEL’s 10th anniversary have been reduced to this 2.5%. Interest is also subject to income tax (default is flat tax, including 30% social security contribution) from your 12th birthday. However, even if you pay income tax and social security contributions every year, the net tax rate will be 1.75%. Currently, it is unbeatable as a risk-free investment.Result: Capital doubles “Only” 40 years old (1)..

Old PEL was rewarded with a total of 2.5% * capital
After five years € 10,906
… 10 years 11,894 euros
… 20 years € 14,148
… 30 years € 16,828
… 40 years 20,016 euros

* By applying 30% flat tax

Its weakness : Only PEL holders opened before March 2011 can use this rate ad vitam aeternam … Opening the PEL in 2021 will provide a 1% guarantee rate (if you respect regular payments) and interest will be subject to flat tax (social security contributions and income tax). In other words, it is 0.7% after deducting annual tax.At this rate you have to 100 years Double capital … Almost 7 times (15 years) the maximum life of a “new” PEL.

My PEL is 10 years old: will it be closed?

LEP: 32 years … twice as fast as Livret A and life insurance

With a popular savings account, it is not possible to start at 10,000 euros. The maximum payment is € 7,700. Let’s start with 5,000 euros. This is a 2.2% reward after deducting all taxes.Result: In the current situation, it will be needed 32 years to double your savings It is over 10,000 euros thanks to the capitalization of interest.

Even stronger: This rate is 2.2%, and after 64 years, LEP will quadruple it before life insurance or Livret A doubles the starting bet.

LEP received reward at 2.2% capital
At the opening 5,000 euros
After five years € 5,575
… 10 years € 6,216
… 20 years € 7,560
… 32 years old € 10,032
… 64 years old 20,129 euros

Its weakness : LEP is a better preventative savings tool than Livret A, as rewards are doubled for eligible households. LEP development has recently been hampered, among other things, by the need for holders to send proof of resources each year. This chore is gone. Support documents need to be presented only at the opening and will automate annual verification by tax authorities. Some banks do not even need to submit a tax return at the opening if they are eligible.

Livret A, LEP, PEL … What are your most regulated savings products?

Einstein’s Law

How long will it be possible to double the capital with a particular investment?There is a formula to answer it, “Einstein’s Law,” which is simplified by Dr. Albert Bartlett as explained. Finances for everyone For educational articles: Dividing 70 by a percentage number gives you the number of years needed to double your capital. This formula provides a rounded result, but you can get an idea quickly.

example.. For an investment that is paid at 2%, divide 70 by 2 = 35. Capital will double in 35 years.

Accepting some risks, what are your long-term options?

These calculations are already completely theoretical for risk-free products. By definition, performance varies much more from year to year, so such simulations are unfounded for high-risk products. The most obvious symbol is the latest annual performance of CAC 40. It surged 26.37% in 2019, followed by a 7.14% decline in 2020, and a record year of almost 29% in 2021.

Nevertheless, if your goal is to increase your savings in the long run, it is currently difficult to do, even measured, in any way other than taking risks. IEIF (2) Each year, we estimate the returns of different investment families over decades. In its final edition (1980-2020), real estate When action Despite the ups and downs of the market, it once again stands out as the most profitable long-term investment. Annual performance over the last 10 years has been around 8% for equities and 6% for SCPI. But be careful: it’s clearly impossible to predict future returns …

(1) Scenario held by PEL for a total of 2.5%: A plan whose annual interest rate is subject to flat tax (12.8% income tax and 17.2% social security contribution). Therefore, the theoretical capital at the beginning of the scenario is 10,000 euros, a plan for more than 12 years. This PEL is “expired” and no new payments will be made. Savings will double in 40 years and will be taxed in 2022, thanks to the capitalization of interest.

(2) Real Estate and Land Savings Institute.