Almost all pension plan holders make contributions at the end of the year. However, this can be a mistake. So when is the best time to make pension plan contributions?
When is it best to make contributions to the pension plan?
Normally, banks run advertising campaigns at the end of the year to attract customers who have not yet made contributions to their pension plan. It is common for holders to wait until the last quarter of the year because of the tax benefits applicable in the next income tax return.
However, statistics indicate that this is a mistake, since it is more profitable to make contributions to the pension plan throughout the year. There are two reasons for this phenomenon.
On the one hand, leaving contributions only for the month of December means assuming more market risk, since we are betting our investment on a single market context. Dividing the same investment into monthly contributions does not guarantee us large profits, but it reduces the risk of suffering sharp falls in the market (as is happening now with the crisis in Ukraine and Russia).
On the other hand, monthly contributions facilitate the capitalization of savings, i.e. the benefit of compound interest. This interest is added to the initial capital, thus generating, in turn, new returns. But to achieve this effect it is necessary to make regular contributions and to start saving at an early age.
The psychological factor
We must also take into account the psychological factor. The tax advantage that corresponds to us for making contributions to a pension plan is the same regardless of when we make the income. Experts say that it is advisable to systematize the contributions and deposit the money when we receive our salary. This way we will have made the investment from the first day and we will not count on that amount for our monthly expenses.
In any case, if we discover a market opportunity and we want to make a contribution, but we do not have enough money, we can ask for a quick credit. This innovative financing system allows us to obtain small amounts of money in just a few minutes. And the best thing is that their requirements are very simple, so they can be the ideal option to invest at the right time.
