Your First Life Insurance at 25: Where to Start

Julien's profile: a young professional on a tight budget

Julien is 25. A business school graduate, he has just landed his first permanent contract (CDI) as a digital marketing manager at an SME in Paris. His net monthly salary is 2,200 euros. After deducting his rent (750 euros in a flatshare), fixed charges, and living expenses, he has approximately 400 euros per month in savings capacity.

Julien already has a Livret A with 5,000 euros in emergency savings. He now wants to take the next step: investing for the long term. He has heard about life insurance (assurance vie) but does not know where to start.

His objectives

• Build capital for a potential property down payment in 8 to 10 years
• Start preparing for retirement as early as possible
• Take advantage of life insurance's favorable tax treatment by starting the 8-year clock

His constraints

• Investment budget limited to 250 euros per month (he keeps 150 euros as a buffer)
• No in-depth financial knowledge
• Needs a simple and automated solution

The strategy implemented

Step 1: Choose the right contract

Julien compares market offerings and hesitates between three contracts:

Julien's choice: Linxea Spirit 2. Here is why:

1. Unit-linked management fees of 0.50% (versus 0.75% at Boursorama Vie). Over 35 years, this 0.25% difference represents a shortfall of 23,000 euros on a final capital of 300,000 euros.
2. Amundi MSCI World ETF (CW8) available: the benchmark ETF for a passive investor, with 0.38% internal fees.
3. Spirica Nouvelle Generation euro fund is high-performing: 3.13% return in 2024, among the best on the market.
4. No entry fees: every euro contributed is fully invested.

Why not Boursorama Vie? Despite Boursorama's brand recognition, its life insurance policy has two major drawbacks for an ETF investor:

• 0.75% unit-linked management fees instead of 0.50%: over 35 years with 250 euros in monthly contributions, this 0.25% gap represents approximately 23,000 euros less capital
• Less performant euro fund: 2024 return of 2.50% versus 3.13% for Spirica
• More limited ETF catalogue and no CW8 (Amundi MSCI World)

Why not Lucya Cardif? It is an excellent contract, with an even larger ETF catalogue (~60 ETFs). Julien could have chosen it with no problem. He preferred Linxea Spirit 2 for the Spirica euro fund (slightly more performant) and the possibility of investing in SCPI at 100% if his objectives evolve.

Step 2: Define the allocation

Julien is 25 with an investment horizon of at least 10 years. He can afford a dynamic allocation. He chooses the following distribution on Linxea Spirit 2:

• 20% in Spirica Nouvelle Generation euro fund (50 euros/month): for the secure foundation, 2024 return: 3.13%
• 60% in Amundi MSCI World UCITS ETF (CW8) (150 euros/month): exposure to 1,500 companies in developed countries, internal fees 0.38%
• 10% in Amundi S&P 500 UCITS ETF (25 euros/month): overweighting the 500 largest American companies, internal fees 0.15%
• 10% in Amundi MSCI Emerging Markets UCITS ETF (AEEM) (25 euros/month): exposure to emerging markets (China, India, Brazil), internal fees 0.20%

This allocation gives him complete geographic diversification: approximately 1,800 companies across more than 45 countries, with weighted average internal management fees of only 0.32%. Combined with the policy fees (0.50%), the total annual cost is 0.82%, three times less than a typical actively managed fund.

Why 80% in unit-linked funds and not 100%? The 20% in euro funds serves as a safety cushion. In case of a stock market crash (like -33% in March 2020), this pocket dampens the overall portfolio decline. For a young investor without experience, it is psychologically reassuring.

Step 3: Set up scheduled contributions

Julien configures an automatic debit of 250 euros on the 5th of each month on Linxea Spirit 2, right after receiving his salary. The distribution is automatic according to the defined allocation: 50 euros in euro funds, 150 euros in CW8, 25 euros in S&P 500, 25 euros in Emerging Markets.

Automation is key: Julien no longer has to think about it and avoids spending the money impulsively. Scheduled contributions also offer a technical advantage: dollar-cost averaging. By buying each month at a different price, Julien avoids the risk of investing all his capital at a peak.

Step 4: Draft the beneficiary clause

Single and without children, Julien designates his parents as beneficiaries in equal shares, with the mention "failing that, my heirs." He can modify this clause for free at any time if his family situation changes (marriage, children).

The numbers: projection at 10, 20, and 35 years

Calculation assumptions:

• Initial contribution: 500 euros (Linxea Spirit 2 minimum)
• Monthly contributions: 250 euros (of which 200 euros in ETFs and 50 euros in euro funds)
• Euro fund return: 2.80% net (conservative assumption)
• ETF return: 7% gross annual average (MSCI World 30-year historical average)
• Weighted average return of the allocation (80/20): 6.16% gross
• Annual management fees deducted: 0.82% (0.50% policy + 0.32% average ETF fees)
• Net-of-fees return: 5.34%

Comparison with Boursorama Vie (0.75% unit-linked fees): on the same ETF portfolio, the net return would be 4.93% (instead of 5.34%). At age 60, the capital would be 272,000 euros instead of 295,000 euros, or 23,000 euros less solely due to the management fee difference.

These projections illustrate the power of compound interest: at age 60, gains would represent nearly double the invested capital. And every tenth of a percentage point saved on fees translates into thousands of additional euros.

Tax treatment on withdrawal

After 8 years of holding, Julien benefits from life insurance's reduced tax treatment:

• Annual allowance: 4,600 euros of gains exempt from income tax for a single person (9,200 euros for a couple)
• Tax rate on gains: 7.5% beyond the allowance + 17.2% social contributions

Take the example of a partial withdrawal of 20,000 euros at age 35 (10-year-old policy, capital of 39,800 euros). Of these 20,000 euros, the gains portion would be approximately 4,670 euros (proportional to the gains/capital ratio: 9,300 / 39,800 = 23.4%). After the 4,600 euro allowance, only 70 euros would be subject to the 7.5% tax, amounting to 5 euros in tax. Social contributions of 17.2% would apply to the 4,670 euros of gains, amounting to 803 euros. Total: 808 euros in tax on a 20,000 euro withdrawal, an effective rate of only 4%.

Mistakes Julien avoided

Not opening too late

By opening his Linxea Spirit 2 policy at age 25, Julien immediately starts the 8-year tax clock. At age 33, he will already benefit from optimal taxation. Had he waited until age 30, he would not qualify until age 38.

Not putting everything in euro funds

At his age, Julien can absorb market volatility. Over every 15-year period since 1970, the MSCI World has never been negative. Had he put 100% in euro funds at 2.80%, his capital at age 35 would have been only 34,400 euros instead of 39,800 euros, a shortfall of 5,400 euros. Over 35 years, the gap would be catastrophic: 143,000 euros in euro funds versus 295,000 euros with the ETF allocation.

Not signing up with his bank

Julien turned down his Societe Generale advisor's proposal for a Sogecap contract with 2.5% entry fees and 1% unit-linked management fees. Over 10 years with 250 euros per month:

• Linxea Spirit 2 (0% entry, 0.50% management): 39,800 euros
• Bank Sogecap contract (2.5% entry, 1.00% management): approximately 33,500 euros
• Difference: 6,300 euros, equivalent to 25 months of contributions lost in fees.

Not buying expensive active funds

His bank advisor had also recommended the Edmond de Rothschild Fund Big Data (internal fees of 2.05%). The Amundi MSCI World ETF does the same job (better, in fact) for 0.38% in fees. Over 20 years, this 1.67% difference represents approximately 25,000 euros less capital.

Planned adjustments over time

Julien will not keep the same strategy for 35 years. Here are the planned adaptations:

• At 30: if he is in a couple and his income has increased, raise contributions to 400 euros per month. Open a second policy (Lucya Cardif) to diversify insurers.
• At 33: the Linxea Spirit 2 policy will be 8 years old. If Julien is considering a property purchase, he can make a tax-optimized partial withdrawal for a down payment. In parallel, open a PER (Linxea Spirit PER) if his TMI reaches 30%.
• At 35: if purchasing property, make a 20,000 euro partial withdrawal from Linxea Spirit 2 for the down payment (minimal taxation thanks to the allowance), then resume contributions as soon as possible.
• At 40: open a PER Linxea Spirit PER as a supplement if the TMI justifies it (30% or more). Contribute 3,000 to 5,000 euros per year for the tax deduction.
• At 50: start gradually securing the allocation on Linxea Spirit 2 (increase the euro fund portion to 40%, then 60% at age 55). Reduce emerging markets exposure. Add a SCPI pocket (Epargne Pierre, Iroko Zen) for regular yield.

Key takeaways

Julien's case demonstrates that you do not need a large portfolio to start investing wisely. With 250 euros per month on Linxea Spirit 2 and a simple ETF allocation (CW8 + S&P 500 + Emerging Markets), a 25-year-old professional can:

• Start the 8-year tax clock as early as possible
• Fully leverage the power of compound interest
• Build capital of 295,000 euros by age 60 (for 105,500 euros contributed)
• Save 23,000 euros compared to a higher-fee contract (Boursorama Vie)

The key point: every year counts and every tenth of a percentage point in fees counts. One euro invested at 25 with 0.82% fees is worth far more than one euro invested at 40 with 1.75% fees. Time and low fees are youth's two greatest allies when it comes to saving.

This article is published for informational purposes and does not constitute personalized investment advice. Past performance does not guarantee future results. Projections are based on return assumptions that may not materialize. Before making any investment decision, consult a qualified financial advisor.