The private pension plan for different age groups
The statutory pension is usually not sufficient to maintain the accustomed standard of living in old age. In most cases, occupational pension plans can also only reduce the pension gap, but not close it. For many people, therefore, a private pension plan is becoming necessary. If you want to live well in old age and ideally even close the pension gap completely, you should start building up a private pension as early as possible. But what should be the amount at what age? We will try to shed some light on this in the following.
It is now clear to most employees that the statutory pension alone will not be enough for a good life in the future. Nevertheless, for many employees, especially younger ones, retirement is such a distant prospect that they have little desire to consider it. This, however, is a big fallacy. Because time is a very precious commodity – especially when it comes to retirement planning.
The earlier one starts to make provisions for old age, the greater the chance of closing the pension gap that arises in old age, ie the difference between the last salary as an employee and the amount of the statutory pension.
But how much money needs to be saved or invested each month as additional retirement provision in order to maintain the accustomed standard of living in old age? And how much should one ideally already have available as capital at what age.
Asset management company Genève Invest has thought about this in detail.
To do this, the first step was to analyze the average salaries of 30- to 60-year-olds in Germany – in this example, unmarried and childless – to determine their likely pension gap. In a second step, Genève Invest then determined how much the so-called model investor should ideally already have available as capital in the various phases of life in order to achieve the savings target – and without having to restrict his usual lifestyle too much.
Therefore, a savings rate of ten percent of income was used for the study, as recommended by other financial experts. In addition, the study assumes a retirement age of 67 and an average (and successively increasing) pension duration of currently 14 to 15 years. After all, the average life expectancy of Germans is currently around 81 years.
This is how much a 30-year-old today should set aside for retirement.
According to a study, a 30-year-old earns an average of 45,213 euros gross per year. This corresponds to a monthly net salary of 2,368 euros. If today’s 30-year-old retires at 67, unmarried and childless, he would receive a statutory pension of around 1,570 euros gross per month (net pension around 1,300 to 1,400 euros). This would leave him with an average monthly shortfall of 1,000 euros to maintain his current standard of living in old age.
If he wants to make up the difference to his net salary, the 30-year-old today would have to set aside a total of 181,000 euros by the time he retires (taking inflation into account). With this sum, he could make up his pension gap for 15 years. Assuming a savings rate of 10 percent, the 30-year-old could still save around 128,000 euros. This means that a 30-year-old should already have around 53,000 euros in his or her account today if he or she wants to close the remaining pension gap to the current standard of living of 2,368 euros per month.
Anyone who is 40 years old should already have 109,000 euros set aside for retirement today, according to the calculations.
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This is how much you should have set aside for your pension at 40
Anyone who is 40 years old should already have 109,000 euros set aside for retirement today, the calculations show. The reason: On average, a 40-year-old in Germany currently earns 55,627 euros gross per year, or 2791 euros net per month. However, because his statutory pension will only be around 1,919 euros gross per month in old age, he will be short an average of 1,140 euros per month (net pension approximately between 1,550 and 1,660 euros).
With 15 years of pension drawdown, taking inflation into account, this results in a total of 206,000 euros in missing capital in old age. Since he can set aside money for his old-age provision for another 27 years, he still has a savings total of around 97,000 euros at ten percent of net income.
At the age of 50: This is what you should have accumulated as capital
At the age of 50, investors should have considerably more money available as capital if they want to maintain their standard of living in old age. 50-year-olds in Germany earn an average gross salary of 58,213 euros, making an average of 2,892 euros net per month. This results in a pension entitlement, at retirement age 67, of 2,020 euros gross per month (net pension approximately between 1,630 and 1,750 euros).
The result: For today’s 50-year-old, there is a gap of 208,440 euros if he wants to maintain his standard of living of 2,892 euros net per month over 15 years in retirement. If he saves ten percent of his net income from now on, he will only make it to 62,671 euros in the 17 years until retirement. According to this, a 50-year-old should already have saved 145,769 euros. Otherwise, he will have significantly less money available each month compared to his net earnings.
One thing is certain: The above study is a wake-up call to all those who prefer to put off private pension provision until tomorrow. However, the high sums are no reason to panic. There are various reasons for this: For example, the pension gap calculated here only shows the difference between net earnings and the statutory pension, so no additional income from company or private pension plans is included. In addition, the figures were also based on the fact that the savings do not earn any interest or increase in value.
If the 30-year-old were to put ten percent of his average salary of 2,368 euros (equivalent to 237 euros) into a share savings plan, for example, he would have significantly more saved when he retired.
With a calculated return of seven percent, which is quite realistic (it is the average return achieved by the MSCI World since 1991 until today), he would come to a total of 470,500 euros.
To put this in perspective, the 30-year-old would only need 181,000 euros to maintain his standard of living for 15 years in old age. Even after deducting taxes, this amount would therefore be more than cover the pension gap,
It would also make a significant difference for the 40-year-old to invest his money in a stock savings plan. If he saves ten percent of his income at a rate of 279 euros per month, he can still reach a total of 257,000 euros by the time he retires. Even after tax deductions, this would close the pension gap. If the savings rate were increased over time, the total amount would be correspondingly higher.
Do you have questions about your pension plan?
The Geneve-Invest Group has been successfully and independently active in the design of individual retirement plans for many years. You will receive further information in a non-binding consultation.
For all the above reasons, Genève Invest makes the following recommendations to younger investors in particular:
- to start making private pension provision as early as possible (ideally when you enter working life),
- build up private pension provision in high-yield investments, preferably in a share savings plan,
- keep an eye on the costs for the plant and minimize them if necessary.
A competent Genève Invest advisor will be happy to assist you in a personal consultation to explore the options for private retirement planning and develop a long-term retirement strategy tailored to your individual needs.