Thinking about old age at a young age? It is essential, yet many people do not practice it sufficiently. The reasons for this can be manifold. If the necessity is not passed on to children by their parents, pension gaps can arise in old age that cannot be fully closed. Furthermore, a large proportion of working people are also not economically in a position to set aside a portion of their earnings to provide for their old age.
With all these considerations, it is important to consider what the future standard of living should look like. Even if no one has a crystal ball today to foresee the future, health restrictions in old age should also be taken into account today. How much should already be tucked away, and how can one provide for old age with simple means? To avoid sliding into old-age poverty, the following overview helps to potentially turn things around.
Keep your eyes open when job hunting
In order to be financially able to provide for old age at all, it is important not to rely solely on personal preferences when Job search. What is the use of the most interesting job if only enough remains to just make ends meet? A future-proof job with reasonable pay and prospects contributes significantly to being able to build up reserves.
Define goals for building up reserves
How much money is actually needed in old age to be able to close the pension gap between receiving the statutory pension and maintaining one's standard of living?
The following questions can shed light on the criteria that should be used to determine the savings capital available in old age:
– What standard of living do I want to lead in old age?
– What dreams and goals do I still want to fulfill in old age?
– Do I only have to provide for myself or also for my partner? Are there children I would like to help with their own wealth accumulation?
– Is it already foreseeable today that there may be additional expenses, such as financing a nursing home place due to the lack of a widow's pension for a parent?
Added to this is the potential for inflation, where the capital available today loses value. By incorporating these considerations into your wealth accumulation plan today, you gain a sense of how high the required sum should be in old age.
To be able to build up reserves outside of your checking account and not accidentally spend the money, a call money account is recommended.
This is how average incomes are defined
You may be asking yourself what actually constitutes a low earner, average earner, high earner, and top earner.
For definition purposes, the following monthly net average values for single persons can be noted:
- Low earner: approximately under 1,560 euros
- Average earner: approximately 1,560 euros to 2,920 euros
- High earner: approximately 3,529 euros
- Top earner: approximately 15,000 euros
How much money should already be in the account today
Age: 30
In a Gehalt.de study, it was noted that the average income of 30-year-olds is approximately 45,213 euros annually. This results in a pension entitlement of 1,400 euros per month for childless singles. In order to reach an adequately high sum in old age, this results in a pension gap of 900 euros – month after month. Over a period of 15 years, this results in a deficit of 165,000 euros (inflation already included). According to financial experts, it is important to save about 10%. This corresponds to around 230 euros per month. Anyone who is 30 years old today should therefore save about 125,000 euros by the time they retire (salary jumps also already included). Ultimately, the goal is to close a financial deficit of 40,000 euros – the pension gap.
Age: 40
The average net income of 40-year-olds is around 2,723 euros per month, which results in a statutory pension of about 1,650 euros per month. If the standard of living is to be maintained here as well, 1,070 euros per month will be missing at the start of retirement. Projected over 15 years, this results in a deficit of about 190,000 euros, including inflation. If 10% of the net income is saved again, about 95,000 euros can be set aside. The pension gap is accordingly also 95,000 euros.
Age: 50
With a monthly net of 2,826 euros according to the experts' data, a pension of around 1,700 euros per month is to be expected. A monthly shortfall of 1,130 euros leads to a minus of 193,000 euros over 15 years, including inflation. With a 10% monthly savings rate, 61,000 euros can be tucked away. Consequently, 50-year-olds should have saved 132,000 euros.
Conclusion
In order to minimize or close the pension gap in old age at a young age, it is necessary to take a realistic look at the future, define goals, and remain as consistent as possible when building up reserves.
