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retirement provision : How much of their income should each save for retirement
Berlin - Those who rely solely on the statutory pension will have to limit their standard of living extremely. The pension level is currently 48 percent. This means that the average pension of a pensioner who has paid contributions for 45 years is currently less than half of the average employee income. According to the federal government's current pension insurance report, the pension level will drop to as much as 44.5 percent by 2033. Although the grand coalition has agreed to introduce a basic pension, this will only cover the basic needs of long-term contributors with incomes below average earnings. So if you want to restrict yourself as little as possible in retirement, you have to take precautions.
But what does that mean for the individual? How much would employees have to save each month in order to be able to maintain their standard of living in old age? Although these questions can never be answered across the board, there are guidelines that help to develop an idea of the order of magnitude. In addition to the necessary savings rate, this also includes the anticipated need in old age, which will be different than during the employee's time.
The need in old age
Rule of thumb: 80 percent of the last net salary is necessary to maintain the standard of living in retirement.
Explanation: Once you get out of work, there are no costs for the daily commute to the office. As a rule, children are then old enough to be able to stand financially on their own two feet. In particular, however, pension costs, i.e. everything that was previously painstakingly put aside for old-age provision, should now be paid out and no longer incur any costs.
Restriction: However, new costs can also arise. Do you need an expensive, age-appropriate renovation of the house? Large parts of the expenses for medication and care services have to be paid out of pocket. The rule of thumb of 80 percent is often based on the fact that the old large apartment is no longer needed in old age. But if moving to a smaller apartment is out of the question, no relief can be expected. More conservative estimates are more likely to recommend 95 percent of the last net salary. Ultimately, everyone should make their own invoice and collect expected monthly costs.
The necessary savings rate
Rule of thumb: Ten to 15 percent of the net salary should be spent on private retirement provision every month, but at least as much as possible.
Explanation: Those who start putting 15 percent into private pension provision at the age of 30 will likely reach a level of around 80 percent of their net income when they retire. It is taken into account that the salary will rise over the years and that private pension provision will generate returns - but at the same time that inflation will rise. If inflation rises faster than wages, this gap would have to be closed again.
Restriction: The amount of the additional savings rate depends crucially on how early someone starts saving regularly. If an employee does not begin to save or invest money until the age of 40 or even later, in addition to the statutory pension contribution, the amount would have to be correspondingly higher in order to achieve the required assets by the retirement age. The guideline applies to 30-year-olds who are employees. The self-employed tend to have to plan more, civil servants less. Generally speaking, the ten to fifteen percent is only a guide that depends on individual living conditions. Are longer work breaks to be expected that will ultimately shrink your assets? Or are rental income, inheritance or assets to be expected from another source that can be included in the retirement provision? This should also be taken into account when making an invoice. For many, a high savings rate will also not always be possible. Then it is at least a matter of putting back what can be shredded.
The right retirement provision
There are several options when it comes to choosing private retirement provision. A general distinction is made between state-sponsored products such as the Riester pension or company pension scheme and non-state-sponsored products such as life insurance, pension insurance or a non-contractual investment in shares or ETFs. These are exchange-traded index funds that replicate the performance of an entire index, such as the Dax.
While pension insurance and endowment insurance hardly generate any more returns and many experts hardly recommend a new contract because of the high costs, there are also advantages and disadvantages with the other products. In the case of the subsidized products, contributions and allowances paid in at the time of retirement are safe, but high taxes must be paid on the pensions in old age. Here it must be weighed whether the funding pays off or is eaten up. With an ETF savings plan, taxes are incurred and there is the risk of losing money at times, but those who invest long-term have a good chance of a higher return.
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