Next year, the tax on investment savings accounts (ISK) will be reduced by 18%, and savings up to 150,000 SEK will be tax-free.
According to Länsförsäkringar’s pension economist, Trifa Chireh, it may still be more profitable to engage in salary conversion rather than saving in an ISK account. Chireh’s calculations show that salary conversion can result in a 34% higher payout per month compared to ISK, potentially leading to thousands of extra SEK per month.
Those earning above the new threshold and with a monthly salary of at least 53,600 SEK should consider salary conversion, according to LF. Salary conversion involves sacrificing a portion of one’s salary to increase their occupational pension, which can be accessed earliest at the age of 55.
“Our calculation demonstrates that salary conversion still yields higher returns. This is due to low taxation combined with deferred tax, making salary conversion more advantageous in comparison. However, ISK remains a favorable savings option for those unable to engage in salary conversion, especially now with the introduction of a tax-free threshold and a reduction in annual taxes,” the pension economist asserts.
Salary conversion is a strategic financial move that enables individuals to optimize their retirement savings and potentially increase their monthly payouts in the long run. By diverting a portion of their salary towards their occupational pension, individuals can benefit from lower taxation and deferred tax payments, ultimately leading to a more substantial nest egg for retirement.
It is essential for individuals to carefully consider their financial goals, income levels, and long-term savings strategies when deciding between ISK savings and salary conversion. While ISK accounts offer a tax-efficient way to save and invest, salary conversion can provide higher returns and increased monthly payouts, making it a compelling option for those looking to maximize their retirement savings.
In conclusion, the upcoming changes to ISK taxation present an opportunity for individuals to reassess their savings strategies and consider the benefits of salary conversion. By leveraging the advantages of salary conversion, individuals can potentially enhance their retirement savings and secure a more financially stable future. With careful planning and strategic decision-making, individuals can navigate the evolving landscape of personal finance and build a robust foundation for their retirement years.