There are so many things that can happen in the future. We all dream about the good life, but have to work hard to achieve it. Everyone has to make an effort if they want to see their dreams come true. Some of us don't want to think about the future at all, others have everything planned down to the finest detail. Anyone can go on about their dream jobs, but are you ready to learn and work hard to get there? Should you create our own company or study and work abroad? How do you guarantee a secure future for your children? And what happens when active working life is replaced by retirement?
Many of these questions may not be relevant today, but it pays to think about the things we could do today to secure our future. Your future has already started, because the choices you make today are the foundation for the things to come. In any case, it is easier to live today and think about tomorrow if you can be sure that you will never run out of money.
Starting a job brings many rights and obligations. Working family members contribute to the family's income and its joint economic success. At the same time, they pay taxes to the state and become entitled to health and unemployment insurance, a state pension and other benefits and bonuses offered by the state to taxpayers.
We should consider all possible manners of working when speaking about work: paid employment, working as an entrepreneur, raising children and looking after family members, housework. It is easy to measure the income earned from paid employment or business management, but many of us are not used to doing it in the case of raising children and housework. Yet it is clear to everyone that a mother who devotes years to raising her children has not just wasted their time or used it for a lovely long holiday.
Having to pay taxes is not nice, but taxpayers do get social services and guarantees in return for their money. Unemployment insurance premiums and income tax are deducted from your gross salary, i.e. the figure given in your employment contract. If you have joined the second pension pillar and decided to continue contributing to your pension also at the time when the state does not support the pillar, then your statutory pension insurance premiums will also be deducted from your gross salary. You are left with the net salary, i.e. the amount that is paid into your bank account. You also pay tax in shops (VAT) and you have to pay excise duty on certain goods (e.g. cigarettes, petrol, alcohol, natural gas). You also have to pay income tax on any other income you earn.
Employers pay their share of unemployment insurance premiums on behalf of their employees and they also pay the 33% social tax on your salary, which is used for the provision of several public services, including payment for medical assistance through the Health Insurance Fund and payment of pensions. This amount is not deducted from your gross salary, but is paid by your employer in addition to your salary.
A minimum that is exempt from income tax is also applied to salaries and it is currently 1728 euros per year or 144 euros per month. This means that 144 euros of your monthly earnings are exempt from tax. You have to pay the taxes described above on the part of your salary that exceeds the minimum.
Retirement seems to be somewhere in the distant future. Well, retirement actually starts here and now. At least this is the case if you wish to maintain your current standard of life after you retire. The Estonian pension system means that the person primarily responsible for your pension investments is yourself. Your pension should amount to at least 65-70% of your current income if you wish to maintain your current quality of life when you retire. According to estimates, state pension and mandatory funded pension will cover about one-half of a person's monthly income prior to retirement, which means that you have to save the remaining amount. This is why now is a good time to start planning. Save and invest – the earlier you start, the better your opportunities to save a decent amount in your pension fund. Every kroon you have saved and invested correctly plays an important role in your later life.
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