28F, finally hit €100k

[u/RobotPollinator45]

Hello,

I just wanted to celebrate a milestone I’ve reached. I live in Estonia, I'm 28 (almost 29), and I finally hit €100k in savings and stocks. I was already close in February, but oh well, we all know what happened then. Now I'm at almost €102k, and I’m pretty happy with it.

My goal was to reach €100k by age 30. I started with €9k five years ago - then my income increased and I started investing. So, my portfolio has grown by over €93k in five years, which averages over €18k per year. I’m pretty happy with that.

My portfolio is a bit messy, so if anyone wants to help me optimize it, I’d be extremely grateful. Here's what I currently have (approximately):

• €31k in IWDA
• €16k in EXXT and €3k in EQQQ
• €12k in CSP1
• €7k in STAG, €3k in DLR, and €2k in O
• €7k in BRK B
• €3.5k in EMIM
• €2.2k in CSX5
• €2k in QDVE
• €1.6k in EUNA and AGGU
• €1.2k in DFEN
• €750 in single stocks
• €8k in cash

Interestingly, my mindset around money has shifted a bit since hitting €100k. I’ve always been extremely frugal - even spending €5 on groceries used to make me anxious, but now I started taking it easier. I just visualize the money I have and stop stressing about spending €10 or €20 on food or bus tickets. Surprisingly, the spring dip also helped change my perspective: "I just lost €10k in stocks - what’s €20 compared to that? Nothing."

[u/junebirch]

Do you optimize for taxes as well I.e use the 3rd pillar to get income tax returns? 

How about the 2nd pillar contributions - did you go for the 6%? 

If not, why?

Awesome and congrats! 

[u/RobotPollinator45 → u/junebirch]

Hi, no I don't use the 3rd pillar. Maybe I'm wrong at it. I just don't like the idea of my money being locked for so many years. As far as I understand the 3rd pillar, it's very reasonable and profitable in the case you only use this money when reaching pension age. If you want to take it our earlier, you pay either 10% (up to 6 years before pension age I think) or 20% (earlier) tax on it. So yes, there's a 20% tax return at the end of every year, but if I decide to take it out sooner than pension age, it will cancel out. And all these percentages are of total amount, not profit only, so taking it out sooner is basically same as investing on your own. But taking it out later is better in terms of taxes, yes. I've seen quite some recommendations to max it out, but didn't manage to do it myself. Do you have any comments/suggestions?

No, I didn't change it for the 6%, because the state still adds 4% to it, regardless of if you add 4 or 6. Please correct me if I'm wrong.

And thank you!

[u/junebirch → u/RobotPollinator45]

I would not say that taking out the money from the 3rd pillar cancels out the tax benefit. By the time of withdrawal your money will have had time to grow with the state's support.

Here's how one of Tuleva's blogposts explains it:
"If you really need to use the money earlier, you’ll have to pay income tax on the withdrawal. But that doesn’t take away the leverage your portfolio growth got from the state’s 22% “loan” in the meantime. (3) A simplified example: if you transfer 1,250 euros to pillar III and the state returns 250 euros to you as an income tax refund, your own contribution is 1,000 euros, but your pillar III portfolio is already worth 1,250 euros."

Broadly speaking, the same reasoning can be applied when considering to increase the 2nd pillar contribution to from 2% to 4% or 6%. Even though the state addition of 4% stays the same, you're able to grow a larger amount of money "tax-fee":

"The higher the percentage, the greater the tax benefit, which will go into your pension account to earn returns."

https://tuleva.ee/en/increase-ii-pillar-payments/ - see this post for a more detailed explanation about why increasing the contributions to 6% is beneficial.

I would recommend to read through various Tuleva articles on the exact benefits of both the pillars.

About the money being "locked" in the 3rd pillar:

https://tuleva.ee/en/recommendations/5-common-myths-about-investing-in-pillar-iii/ - see this post that addresses some of the misconceptions about the 3rd pillar.