For most people, the statutory pension will not be enough. Therefore, you should make private provisions early on - so that you can even retire early.
Munich - If you don't make private provisions for old age, things could be tight for you - because the statutory pension alone is probably not enough to live on for many people. The earlier you start saving, the better - but even if you're over 50, you can still save money.
You should no longer work part-time when you reach retirement age, says Giuseppe Digaeta, consultant at Stadtsparkasse München. “Of course, as a pensioner you can now earn unlimited amounts. But it can’t be the point of working all your life and then being forced to continue working when you get older,” he emphasizes. “It’s nicer to have a well-deserved retirement at the age of 63.”
When should you start planning for your retirement?
But anyone who wants to retire in Germany at the age of 63 usually has to accept discounts. In the worst case, there is a risk of a supply gap. This means that when you start to retire, your monthly income is significantly lower than when your salary was transferred to your account every month. In order to prevent a gap in supply from arising in the first place, it is advisable to take private precautions. The consumer advice centers say: “Private retirement provision is basically nothing other than long-term wealth creation.”
The question remains: When is the ideal time to start saving? As early as possible, says savings bank consultant Digaeta. “It's best for parents to start setting aside money for their children as soon as they're born.” But in practice, that's usually not the case. “Most people usually start thinking about retirement planning when they start their careers. The advantage at this age is that you can have a big impact even with small savings amounts.” However, Digaeta emphasizes that you can also take care of the issue at the age of 50 and older, but then you usually have to save larger amounts invest.
In many cases, retirement provision in Germany is made up of three components: the statutory pension, a company pension and, in the best case, a private pension provision. Employees usually find out how high the statutory pension is likely to be from the annual information letter from the German Pension Insurance Federation. “Very few people know what to do with the post office,” says savings bank consultant Digaeta. “But this pension information is an important component in determining the pension gap.”
Then you still need the information from the company pension plan. This is usually obtained from the documents. “Then the question arises: Does anyone already have a private pension plan? Some may also have a property that can generate rental income in old age or in which they can live rent-free.” Others may have securities. If there is still a risk of a supply gap, saving is a must. “The current pension level is around 50 percent. This means that most people only have about half of their last monthly income left as they age.”
The right strategy: How to save for retirement
But: How much money from your monthly salary should you divert for old age? “At the beginning you do a budget calculation. That means: You look at how high your income is and how high your expenses are. Then you can see how much money is left over to provide for old age,” says Digaeta. However, you shouldn't put all your savings into retirement provision: “I'm a big fan of broad diversification into short, medium and long-term investments. This includes a short-term money account in which you put aside an emergency fund,” says Digaeta. This should be at least three months' salary, which is roughly in the daily money account. “It can always happen that the car has to go to the workshop or the washing machine breaks down. Then it makes sense if you can fall back on this emergency fund and not endanger your retirement provision.”
In general, there are various financial products to make provisions for old age. Giuseppe Digaeta from the Stadtsparkasse says: “It is not possible to say in general terms which solution is suitable for whom.” What is a good solution for one person does not necessarily have to be suitable for another. “There are customers who have no problem if their securities portfolio occasionally slips ten percent into the red. If you want to invest your money more conservatively, you can do so, for example, with private pension insurance. Someone else would prefer to have their own property when they get older.” It is best for customers to seek advice in order to find the right solution. This pays off in old age. Digaeta says: “A well-known song says that life begins at 66 years old. I am of the opinion that life should start at the age of 63 – that is, at the earliest possible retirement.”