Private pension provision

What is clear is that the statutory pension alone will most likely not be able to cover the standard of living you expect. The only way out of this is to forego consumption today, because saving is nothing else. You should save regularly and for the long term. This way you can build up a financial cushion.

The starting point is the so-called pension gap

The pension gap is calculated by subtracting the expected income from the statutory pension from your future desired pension.

Desired pension - statutory pension = pension gap

You will be informed of the amount of your state pension

You can find out how much you can expect to receive from the state as a statutory pension from the annual pension information. Please note that these are gross amounts from which your individual contributions to health and long-term care insurance as well as taxes must be deducted.

In addition, a possible loss of purchasing power is not yet included. Typically, you can assume an inflation rate of two percent. In the best case, future pensions are adjusted to inflation.

Inflation plays a major role in your desired pension

It is not easy to estimate how much capital from Exness metatrader 4 you will need to cover your desired expenses in old age. A starting point could be your current net salary, for example. With your desired pension, you should be able to cover all running costs and usual expenses.

A decisive role in planning your desired pension, as with any long-term investment decision, is played by future inflation.

The European Central Bank ECB tries to control inflation at around two percent per year in the long term. A two percent devaluation of money does not sound too dramatic, but it means that half of your assets will have melted away after about 30 years.

Three steps to approximately calculate your pension gap

The calculation of the future capital required to close your pension gap will be illustrated with an example. Certain assumptions have been made for this purpose:

•     Your desired retirement is to take place in 25 years.
•     The future desired pension should correspond to 1,800 euros according to today's purchasing power.
•     According to your current pension information, you can expect a statutory pension of 1,400 Euros.

Step 1: How much pension will be needed in 25 years to cover 1,800 euros according to today's purchasing power?

Your desired pension should be 1,800 euros at retirement according to today's purchasing power. However, inflation causes the purchasing power of money to melt away by 2 percent per year until retirement.

In order to have a purchasing power of 1,800 Euros in 25 years, a desired pension of 2,953 Euros is necessary.

Step 2: How high is your monthly pension gap?

As calculated in the first step, your future desired pension is 2,953 euros per month. According to your current pension statement, you can expect a statutory pension of 1,400 euros. Assuming annual inflation is not higher than the pension adjustments.

To calculate the monthly pension gap, the statutory pension is subtracted from your desired pension:

2,953 euros minus 1,400 euros = 1,553 euros.

Step 3: What is the total capital required to close the pension gap?

1,553 Euros pension gap per month is 18,636 Euros per year. For 20 years of retirement, this amounts to a proud sum of

20 x 18,536 = 372,720 euros is required.