Save for Retirement is one of the times when u will need money for your expenses. Moreover, there will be a time when your body cannot go except for you to work hard, so it is advisable to save money when you are young.
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When You Retire, Your Expenses Will Change
As a pensioner, you not only have more time and wrinkles. Your spending behaviour will also be different. They may have to spend more money on medication or medical treatment but eat out less often. You’ve finally paid off your loan, but now you’re spending more money on travel.
It may seem strange to be thoughtful about Retirement just yet. But it does help you figure out how much money you should put aside each month. So you can enjoy your Retirement according to your ideas.
How Much You Need To Save Depends On Your Age Tip To Save For Retirement
Have you believed about how you want to spend your Retirement? Then you can immediately answer the next three questions.
- At what age do you want to retire? The sooner that is, the more money you need.
- In how many years will you reach this age? The more there are, the better – because you can save longer.
- How much interest or yield do you earn? The higher your returns, the faster you can reach your retirement savings goals.
As a rule, when you retire you will need around 70-90% of your annual income from working life. This amount should be comprised of your savings, the state pension and additional private pension insurance.
In other words, if you earn €58,000 per year before Retirement, you will need €40,000 to €52,000 per year from your retirement plan and savings from Retirement to the end of your life.
If you retire at 67 and live to be 85, you will need many years of savings to have a comfortable life. According to our example, you would need between 720,000 and 936,000 euros from the statutory pension and savings during this period.
You didn’t expect such a large sum? Do not worry! There are many tips and tricks you can use to save for Retirement. This also includes the so-called 15 percent rule.
The 15 Percent Rule Tip To Save For Retirement
According to Fidelity, an international investment company specializing in retirement planning, between the ages of 25 and 67 you should be saving around 15% of your gross annual income for Retirement. This will ensure you can maintain your current lifestyle in Retirement.
With this calculation, Fidelity assumes that, thanks to the statutory pension, you will not only have to finance your Retirement from your savings. Luckily that’s how it is in Germany. So you (and most people) only have to contribute an estimated 45%.