PER Simulator : Retirement Capital

The simulator projects the growth of your PER using the compound interest formula with regular contributions. Capital is compounded monthly.

The estimated annuity is calculated using an approximate conversion rate (4% of capital for retirement at age 65+). This rate actually depends on the mortality table used by the insurer at the time of conversion.

Note:This simulator does not account for exit taxation (capital is subject to income tax upon PER withdrawal). Use our "PER vs Life Insurance" comparator for an after-tax comparison.

Determining the amount of savings needed to live comfortably in retirement is a crucial question that too many people postpone. Yet the earlier you start, the less savings effort is needed thanks to compound interest. Several methods can help estimate the target capital to accumulate.

The 25x rule: estimating the required capital

The 25x rule (also called the 4% rule) is a widely used benchmark in financial planning. It states that to live off your savings without depleting them, you need to accumulate capital equal to 25 times your annual retirement expenses. This ratio corresponds to an annual withdrawal rate of 4%, considered sustainable over a period of 30 years or more.

Example: if you estimate needing 2,000 euros per month in retirement (24,000 euros per year), you need a capital of 24,000 x 25 = 600,000 euros. If the mandatory state pension covers 1,200 euros per month, the additional amount needed is 800 euros per month (9,600 euros per year), giving a target capital of 9,600 x 25 = 240,000 euros.

The replacement rate: understanding the gap to bridge

The replacement rate represents the percentage of your last working income that you will receive as a retirement pension. In France, this rate varies considerably depending on your employment status:

• Non-executive employees: approximately 70 to 75% of the last net salary
• Executives: approximately 50 to 60% of the last net salary (senior executives are the most affected as supplementary pension schemes are capped)
• Self-employed professionals: approximately 30 to 50% depending on the pension fund
• Civil servants: approximately 60 to 75% of the last salary

The PER is an essential tool for bridging this gap between your working income and your retirement pension. The higher your income, the larger the gap to bridge, and the more relevant the PER becomes.

Worked example for an executive earning 50,000 euros per year

Take the example of Sophie, a 35-year-old executive earning 50,000 euros gross per year (approximately 39,000 euros net). Her estimated replacement rate is 55%, giving a pension of approximately 21,450 euros net per year (1,788 euros per month). To maintain her standard of living (estimated at 80% of her working income, i.e. 31,200 euros per year), she needs to bridge a gap of 31,200 - 21,450 = 9,750 euros per year.

Using the 25x rule, the target capital is 9,750 x 25 = 243,750 euros. By contributing 300 euros per month to her PER from age 35 with a 5% return, Sophie will accumulate approximately 250,000 euros by age 64. Her goal is achieved with a savings effort of only 7.7% of her gross salary. Had she started at 25, just 180 euros per month would have been enough to reach the same capital.

The long horizon of the PER (often 20 to 40 years) allows for a dynamic investment strategy in the early years, gradually securing the portfolio as retirement approaches. This approach, called target-date management or default managed allocation, is in fact the default management mode imposed by the PACTE law for PER plans.

The principle of target-date retirement management

The core idea is simple: the further you are from retirement, the more risk you can take, because you have time to recover from potential market downturns. Conversely, as retirement approaches, you need to secure the accumulated capital to avoid suffering a crash at the worst possible time.

Historical studies show that over 20-year horizons and beyond, a diversified equity portfolio has never been negative (in developed markets). However, over 1 to 5-year horizons, the risk of loss is significant. It is this asymmetry that justifies target-date management.

Sample allocation by age profile

Here is an indicative allocation that evolves with age, adapted to the PER framework:

• At 30 (35 years to retirement): 80% equities (world ETF, emerging markets ETF) + 10% real estate (SCPI) + 10% bonds. Expected return: 6 to 7% per year. The long horizon absorbs equity market volatility.
• At 40 (25 years to retirement): 65% equities + 15% real estate + 20% bonds. Expected return: 5 to 6% per year. Risk begins to be very gradually reduced.
• At 50 (15 years to retirement): 50% equities + 15% real estate + 35% bonds and euro funds. Expected return: 4 to 5% per year. The balance between performance and safety becomes important.
• At 55 (10 years to retirement): 35% equities + 10% real estate + 55% bonds and euro funds. Expected return: 3 to 4% per year. Capital protection accelerates.
• At 60 (5 years to retirement): 20% equities + 5% real estate + 75% euro funds and bonds. Expected return: 2.5 to 3% per year. The priority is to preserve accumulated capital.

The most common mistake: being too conservative too early

Many French savers, due to risk aversion, invest almost all of their PER in euro funds from the start. This is a costly mistake over the long term. Take the example of two savers who contribute 200 euros per month from age 30 to 65:

Saver A (100% euro fund at 2.5%): final capital of 135,000 euros for 84,000 euros contributed. Interest: 51,000 euros.

Saver B (target-date management, average return 5%): final capital of 223,000 euros for the same amount contributed. Interest: 139,000 euros.

The difference is 88,000 euros, or 65% more capital for the saver who accepted reasonable risk-taking. Converted to an annuity, this represents approximately 290 euros in additional monthly income in retirement. The stakes are considerable, and it would be unfortunate to miss out due to excessive caution when the investment horizon allows it.

One of the advantages of the PER compared to older retirement savings products (PERP, Madelin) is the freedom of choice at exit. You can withdraw your savings as a lump sum (all at once or in installments), as a life annuity, or combining both. This choice has major tax and estate planning implications that should be anticipated well before retirement age.

Lump sum exit: flexibility and control

A lump sum exit allows you to recover all or part of your PER savings in one or more installments. The capital corresponding to deducted contributions is subject to the progressive income tax scale (without social contributions). Capital gains are taxed at the 30% flat tax (12.8% income tax + 17.2% social contributions). Staggered withdrawals are often preferable to smooth the tax impact: by withdrawing over several years, you avoid pushing your taxable income into a higher bracket.

Example: a retiree with a 200,000 euro PER and a retirement pension of 24,000 euros per year. If they withdraw the entire sum at once, their taxable income jumps to 224,000 euros, placing them in the 41% bracket. By spreading over 10 years (20,000 euros per year), their income reaches 44,000 euros, remaining in the 30% bracket. The tax saving can reach several thousand euros.

Life annuity: guaranteed income for life

The life annuity converts your capital into a regular income paid until your death. It is taxed as a retirement pension (subject to income tax after a 10% allowance). The main advantage is security: you can never exhaust your capital. The downside is irreversibility: once converted to an annuity, the savings are no longer available and cannot be passed on to heirs (unless a reversion option for the spouse is chosen, which reduces the annuity amount).

Optimizing the PER based on your marginal tax rate

The PER is all the more advantageous when the gap between your current MTR (during working life) and your MTR at retirement is significant. If you are taxed at 41% or 45%during your career and your MTR drops to 30% or 11% at retirement, the tax differential is considerable: you saved 41 cents per euro contributed and you only return 30 cents (or even 11 cents) at exit. This tax gain, compounded over 20 or 30 years, represents a significant additional return.

Conversely, if your MTR remains the same between your working life and retirement (for example 30% in both cases), the PER advantage is limited to the cash flow benefit: the tax savings at entry can be invested and generate returns throughout the savings period. This effect, while real, is less spectacular. For taxpayers at 11%, the PER is rarely optimal unless early withdrawal cases are anticipated (primary residence purchase in particular), as the tax savings at entry are low and exit taxation offsets much of the benefit. In this situation, life insurance generally offers better net after-tax returns thanks to its 8-year allowance and reduced withdrawal taxation.