Day 1: Why it’s so important for you to have financial retirement provisions

At 25, retirement still seems plenty far away, but it’s closer than it seems. That’s why there’s a simple answer to the question of when it’s the right time to start thinking about retirement: now.


Start as early as possible…

Ideally when you’re 20: when you’re done with school and have first started earning your own salary. This is because the sooner you get started with saving and investing, the more time your money has to grow. Time, along with consistency, is the most important factor in getting your money to multiply. Here’s the thing: The sooner you get started with planning your retirement provisions and with investing, the less money you have to put away monthly to allow your assets to grow to wonderful numbers.


…but it’s never too late

It’s totally fine if you’re not in your 20s anymore. You can still start taking care of your retirement. Of course, you’ll have to invest more money to achieve similar results, but it’s still worthwhile. If you have kids or are planning to have kids later, it’s good to invest for them when they’re young so that they can cash in on that when they retire. Your kids will thank you for making them rich!


The three pillars of retirement provisions

In Germany, retirement provisions rest on three pillars:


·       Government pension insurance

State retirement provisions are based on the principle that today’s workforce pays for today’s retirees. What we’re talking about here is an intergenerational contract. We’ll get into that again in a little more detail below.


·       Corporate retirement provisions

This involves employees investing in their retirement through their employer. The corporate retirement plan, which is designed to supplement the state pension scheme, is becoming increasingly popular in Germany – about 60% of the population is going with this method.


·       Private retirement provisions

These are offered by banks and insurance companies. The federal government offers incentives such as bonuses and tax credits to encourage people to make contributions. More on that later too.


Throughout this course, we will look more closely at what this means exactly.