Have you thought about what you're going to live on when you retire? The truth is that most Portuguese people will receive a pension far below their current salary. And that is why the state created PPRs, or retirement savings plans. And in the next few minutes I'm going to show you how they work, answer all your questions, and we'll come to a conclusion about whether it's really worth it. I'm going to tell you a story. Maria works in Lisbon and earns a modest 1400 euros a month. At the end of the year, when filing their income tax return, they usually receive a refund of between 200 and 300 euros. Not bad. While having coffee, the company's accountant told him about PPRs (Personal Retirement Plans). Maria, did you know that if you invest 2000 euros in a PPR (Personal Retirement Plan) you get 400 euros back? Maria did the math: investing 2000 euros and receiving 400 euros back in her tax return is a guaranteed 20% return in the first year. She believed it, but wanted to know more, because it seemed too good to be true. And when he started investigating, doubts arose. What if I need the money? What if the PPR (Personal Retirement Plan) makes you lose money? What if there are better alternatives? Maria's story is the story of thousands of Portuguese people. And today we're going to resolve all these doubts once and for all. Because we, at Desconheço, create the most comprehensive videos on the most important topics in the lives of Portuguese people, with the mission of making financial literacy accessible to everyone. And with over 37,000 Portuguese people trusting us, we're not going to let them down today . Join our mission and subscribe so we can reach 50,000 before the end of the year. The first thing Maria wanted to know was: but what exactly is a PPR? Basically, a PPR (Personal Retirement Plan) is a way to invest your money for the long term. The idea is to supplement your retirement income, because with social security alone, well, you've already seen that it won't be enough for extravagant luxuries. The most interesting part is that the sooner you start, the better. Why? Because compound interest needs time to work its magic. It's like a snowball effect. It starts small, but then it grows bigger and bigger. And the cherry on top is that the state gives you tax benefits. That's why many people invest in PPRs here, because of the tax breaks. Oh, and you can have as many PPRs (Personal Retirement Plans) as you want; you can even choose whether or not you want the tax benefits . Maria discovered that there are two types of PPRs (Personal Retirement Plans): funds and insurance policies. Let's look at the funds first. PPR funds are like any other , let's say, normal investment. Imagine it's like choosing the level of adrenaline you want. You can play it safe, low risk, low returns, or you can take more risks and potentially earn more. They rate the risk on a scale of one to seven. Seven is YOLO, let's see what happens. And number one is "I want to sleep very soundly." But be aware that sometimes a safe, level one fund can actually perform better than a risky level seven fund. This is managed by asset management companies that basically take your money and invest it according to the strategy and risk level you have chosen. And now we have PPR insurance policies , which are for those who want a lot of security. This is more for those who want maximum security, of course. Your money is guaranteed, but the returns are very low. It's like putting money in the bank, but with slightly better interest rates . When does this make sense? If you're nearing retirement and don't want any surprises, if you're 30 years old and you're putting everything into PPR insurance, well, you're wasting the power of time and compound interest. Maria realized it right away. Well, under 50 years old, PPR funds. Over 50, does that mean stress? So I'm going to get PPR insurance. Now comes the part that left Maria speechless. The accountant explained to him that there are two tax benefits in the PPR (Personal Retirement Plan). You get the benefit of free entry, let's say the money is free. This is the one everyone knows. You invest money in a PPR (Personal Retirement Plan) and the State returns 20% in the following year's income tax . But there's a catch: it depends on your age. If you are under 35, like Maria, you can deduct up to 400 euros per year. In other words, you can invest 2000 euros to receive the full 400. Between the ages of 35 and 50, the limit drops to 350. You have to invest 1750 euros to get the maximum benefit. After the age of 50, the maximum deduction is only 300 euros , meaning an investment of 1500 euros per year. Maria did the calculations. If I invest the full 2000 euros, I will receive 400 euros back. It's literally 20% guaranteed. But then he thought, wait, if it's this good, what do the tiny letters at the bottom of the page say? We 'll see more about that later. Then you also have the exit benefit, which is lower taxes. And here comes the second surprise. Normally, when you invest or sell investments and make a profit, that is, capital gains, you pay 28% tax to the State. Although even in the stock market things have changed a bit. To learn everything, you can watch our video about ETFs. But in PPRs (Personal Retirement Plans), the rates are much lower. If you sell before 5 years, you pay 21.5%. Between the ages of 5 and 8, 17.2%. And if you've been in the music business for more than 8 years, you only pay 8.6% in capital gains tax. Maria asked: "8.6% instead of 28%? This is a huge saving." But then comes the question everyone asks. Maria began to suspect something was wrong: "If it's so good, why doesn't everyone have a retirement savings plan?" The answer is simple. The money is essentially frozen. Se quiseres aproveitar os benefícios fiscais, só podes tirar o dinheiro sem penalizações em situações muito específicas, como: quando chegares aos 60 anos, se te reformares por velhice, se ficares desempregado de longa duração, em caso de doença grave e para pagar prestações da tua casa. You can only pay the installments; you can't amortize them. And you also have the 5-year rule. If the PPR (Personal Retirement Plan) is more than 5 years old and at least 35% of the total value is invested in the first half of the contract term, you also cannot withdraw it. If you withdraw the money outside of these conditions, you must return all the tax benefits you received plus a 10% fine. And then Maria realized: "Ah, so it really is a long-term commitment. If I put €2,000 there and need the money next year, I'm going to have some problems." Maria was excited about the benefits, but then she started investigating the costs. He found four types of committees that can exist. There's a subscription fee, which you pay when you join the PPR (Personal Retirement Plan) or when you make additional contributions. Basically, when you put money in there. If you want to invest €1,000 and the commission is 2.5%, only €975 will be invested. The rest goes to the bank or the management company that runs the PPR (Personal Retirement Plan). Maria thought: "Well, I'm already losing money before I've even started." And then we have the transfer fee, which only applies to PPR insurance policies. If you want to switch to a PPR fund, you pay a fee. It's basically the bank punishing you for wanting to leave. Then we have the refund commission. When you want to withdraw the money, there may be a fee, because obviously having all the other restrictions isn't enough. And then we have the management committee. This is the most important one; it's what you pay every year to the people who manage your money. If the fund yields 3%, but the commission is 1%, you'll only get 2% net. And then Maria realized: " Wait a minute, these commissions could eat up a good chunk of my profits." And since we're talking about investment costs, let me take a short break here to tell you about XTB and the free bonus we've created that could be very useful for you. If you'd like to start investing in ETFs, but aren't quite 100% comfortable yet, I have a suggestion for you. We've created a super comprehensive e-book on how to start investing from scratch all the way to your first investment. I guarantee that if you just read that and follow all the steps, you'll know everything and how to start investing with confidence. It talks about how to choose your first broker, how to make your first purchase, what mistakes to avoid, and how to organize your strategy. It's like having an instruction manual here to help you start investing. And how can you receive it? It's completely free if you open an account on XTB using the code I don't know. If you're not familiar with XTB, which is also a partner of this channel, it's one of the brokers I most recommend for beginners. Why? Firstly, it's regulated by the CMVM here in Portugal; it 's not just some random platform lost in the middle of nowhere. Secondly, it doesn't charge you commissions on stocks and ETFs up to €100,000 per month. And after that, it's only 0.2%. For most of us, this means investing without transaction costs. And the best part is the investment plans that allow you to make automatic investments so you never forget to invest again. It also makes the process of declaring your investments on your tax return much easier, because XTB is very helpful in this area. Creating an account is simple, takes 10 minutes, is all online, and you can start investing the same day. And listen, you don't need a lot of money, you can start with 50 euros. If you're interested, the link is in the description. Open an account, receive the free e-book, and have everything you need to get started. But remember that investing has risks; never invest money you can't afford to lose. Okay, now you know how to get started, just create an account on XTB using the code from Cunheco. Let's continue with the video. After learning all this, Maria had to make three important decisions. Decision number one: PPR fund or PPR insurance? Since he's 25 years old, it was easy, a PPR fund. PPR insurance policies only make sense when you're nearing retirement and want zero risk. Decision number two: how much risk are you willing to take? Here Maria had to think seriously. The funds have risk levels ranging from one to seven. She's younger, has more time, can take more risks, here at levels five to seven. If you can't tolerate losing money, you can go to the lower levels, from one to three. But remember that past profits are no guarantee of future profits. A fund might yield 5% for years and then lose money the following year. Decision number three: do you want the tax benefits or not? And here gets a little interesting. If you choose to receive the benefits, the money is essentially locked up until you are 60 years old. If you don't choose this option, you can withdraw the money whenever you want, but you'll lose that famous 20% guaranteed return in the first year. After investigating all of this, Maria defined her criteria. First, PPR background. Then, risk level five to six, because there is time to recover if things go wrong. Then, with tax benefits, because she wants those 400 euros a year and low commissions, especially the management fee. But then comes the final question: "OK, but how much will I actually earn from this at the end of 35 years?" Maria decided to run a full simulation. Well, if I'm going to put money into this for decades, I want to know exactly what I can expect. Ela definiu aqui o cenário: começar aos 25 anos e investir até aos 60. O plano da Maria foi: até aos 35 anos, 2000 euros no primeiro ano, depois 2400 por ano, que são os 2000 dela mais 400 euros do benefício fiscal. After the ages of 35, up to 50, it's 2100 per year, meaning those 175 euros per month, which is 1750 euros plus 350 from the tax benefit. And from 50 to 60 years old, 1800 per year, which is 150 euros per month, which is 1500 euros plus 300 euros of tax benefit. So, Maria's pocket costs 63,250 euros over 35 years. We won't count the tax benefits here as coming out of her own pocket, because it counts as a reimbursement. It's extra money from the State. After much research, Maria chose the Safe and Grow PPR from the investment firm. Why this one? Investe 100% em ações, ela é nova, pode arriscar mais, tem um mínimo de 1.000 euros para começar e 100 euros para reforços, é investido maioritariamente nos Estados Unidos da América, 12% em empresas francesas e 7% chinesas. In the United States of America, 75%. The average annual return is 7.54% since it was created in 2020. But Maria was, of course, conservative in her calculations. I'm going to assume a 6% annual return, because 6 years of data is very little, so let's lower it a bit more here . And I prefer to have a lower estimate and be pleasantly surprised. The major drawback is the interest rate of 1.45% per year. If the fund yields 6%, she will have a net profit of 4.55%. The simulation results were as follows: Maria used a compound interest calculator to do the calculations. At age 35, after investing for 10 years, he was left with 33,293 euros. At age 50, after 25 years of investing, €109,610. At 60 years of age, at the end of his journey, he had earned 193,666 euros. Wait, Maria thought, but I still have to pay taxes, because the State takes everything from me. Since you will be holding the PPR (Personal Retirement Plan) for more than 8 years, you will only pay 8.6% in taxes on the profits. The total investment was 75,500 euros, including, of course, those tax benefits. The profit was 118,166 euros. Taxes payable: 10,162 euros. Therefore, the final net value was 183,504 euros. Maria did the calculations here. So, if I invested 63,250 from my own pocket for 35 years and ended up with 183,504. Well, it's not bad at all. But then he thought: "What if I had invested the same amount of money, but somewhere else? Would it really have paid off?" After all this investigation, Maria came to a conclusion: PPRs (Personal Retirement Plans) aren't magic, but they're not a scam either. What works well? Os 20% de retorno garantido no primeiro ano são logo reais, impostos mais baixos a longo prazo, 8.6% face aos 28 ou 19% força-te a poupar para a reforma, o dinheiro vai estar preso, pode ser também uma vantagem porque vai-te obrigar a não tirar. What's not so good about it? Primeiro, os custos de gestão podem comer uma boa parte dos teus lucros e depois a falta de flexibilidade porque o dinheiro fica praticamente inacessível e as rentabilidades passadas não garantem, claro, retornos futuros. After this whole experience, Maria shared some tips for those thinking about investing in PPRs (Personal Retirement Plans). Tip number one: if you are married, each spouse should have their own retirement savings plan (PPR). Then they combine it on their tax return and both benefit. Tip number two: if you want to invest more than the maximum limit for the tax benefit, for example, more than 2000 euros at age 25, invest in a different PPR (Personal Retirement Plan) as well. This way you can withdraw that extra money without losing the tax benefits of the first one. Tip number three: always read the terms and conditions before signing, obviously. Each PPR (Personal Retirement Plan) has its own very specific rules. So, is it worth investing in PPRs? Maria's strength depends on your profile. It makes sense if you're under 45, won't need the money before you're 60, want a more comfortable retirement, and like the guaranteed 20% return. It doesn't make sense if you might need the money in emergencies, you prefer total flexibility in your investments, and you think there are better alternatives like ETFs. Maria decided to invest, but only enough to take advantage of the tax benefits. The rest of the money goes into investments with more flexibility because the truth is that PPRs (Personal Retirement Plans) are only one piece of the puzzle. There are other options that might make more sense for you, such as ETFs, stocks, or even real estate. If you want a complete comparison between PPRs (Brazilian retirement savings plans) and ETFs with 30-year simulations and the definitive answer as to which one is more worthwhile, we have exactly that video. Click here and you'll see that the difference can be more than 240,000 euros.