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. In addition, a large proportion of working people are also not economically in a position to be able to set aside part 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 predict the future, health limitations in old age should also be taken into account today. How much should already be set aside, 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 is left over to just make a living? A future-proof job with reasonable pay and prospects contributes significantly to being able to build up savings.
Define goals for building up savings
How much money is needed in old age at all to to close the shortfall between receiving the statutory pensionand being able to maintain one's standard of living?
The following questions can provide insight into which criteria the savings available in retirement should be measured against:
– What standard of living do I want to have in retirement?
– Which dreams and goals would I still like to fulfill in retirement?
– Do I have to provide only for myself or also for my partner? Are there children I would like to support in building up their own assets?
– Is it already foreseeable that there could be additional expenses, such as financing a care home placement, due to the lack of a parent's widow's pension?
Additionally, there is the possibility of inflation, which causes the capital available today to lose value. By incorporating these considerations into your wealth-building plan today, you will gain a sense of how large the sum needed in retirement should be.
To be able to build up reserves outside the current account and not accidentally spend the money, a high-yield savings account is recommended.
This is how the average incomes are defined
You may be wondering what actually constitutes a low earner, an average earner, a high earner, and a top earner.
For definitional purposes, the following average monthly net values for single individuals are used:
- Low earner: roughly under €1,560
- Average earner: approximately €1,560 to €2,920
- High earner: about 3,529 euros
- Top earner: about 15,000 euros
How much money should already be in your account today
Age: 30
In a Gehalt.de-Studie could be observed that the average income of 30-year-olds is about 45,213 euros per year. This results in a pension entitlement of 1,400 euros per month for childless singles. To reach an adequately high amount in old age, this leads to 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, about 10% should be saved. This corresponds to around 230 euros per month. Someone who is 30 today should therefore save about 125,000 euros by retirement (salary increases also already included). In the end, this means closing a financial shortfall of 40,000 euros — the retirement gap.
Age: 40
The average net income of 40-year-olds is around €2,723 per month, from which a statutory pension of about €1,650 per month would result. To maintain the same standard of living, €1,070 per month would be missing at retirement. Calculated over 15 years including inflation, this results in a deficit amount of approximately €190,000. If 10% of net income is saved again, about €95,000 can be set aside. The pension shortfall is therefore also €95,000.
Age: 50
With a monthly net income of €2,826 according to experts, a pension of around €1,700 per month can be expected. A monthly shortfall of €1,130 leads over 15 years including inflation to a deficit of €193,000. With a 10% monthly savings rate, €61,000 can be put aside. Consequently, 50-year-olds should have saved €132,000.
Conclusion
To minimize or close the pension gap in old age already at a young age, it is necessary to take a realistic view of the future, set goals, and be as consistent as possible when building up reserves.
