Day 4: Your personal plan for retirement

If you want to relax during your retirement a handful of years from now, it’s important that you set yourself clear goals today. Ask yourself point-blank: How much money would I like to have during retirement? You don’t have to define it down to the penny, but you should have an approximate amount in mind in order to build a solid financial future. Next question: When do you want to retire? For people born after 1964, the retirement age is 67. Under certain conditions, you can go into early retirement or draw interim retirement pay. What desires and opportunities do you have here?


How much money do you actually have?

You of course also have to consider your income when planning. This brings up the questions of whether you can earn more, how you manage your money, and if you have a lot of expenses. If you want to reach your retirement goal, you have to know where you sit financially. You should be able to estimate how much you can save and how much you can spend or invest every month.


It’s also very important that you know the total amount of your assets. The total amount of your assets is equal to all the things you own and that completely belong to you, minus your total liabilities (i.e., debts).


Consider also that you could inherit something from your parents or other family members. This inheritance could join your total assets at some point.


Your retirement as it stands today

It is currently very clear that many government retirement schemes – including those in Germany – are not sustainable and could pose challenges for younger generations. The fact that these systems are based on an intergenerational contract in which the current younger generation pays for the retirement of the current older generation means that the system only works if there are enough young people. Because of the demographic shift and the low birth rate, it is foreseeable that future older generations will receive little pension payout (or none at all), even though they had previously contributed – a distressing development. The monthly retirement pay after deduction of social security tax averages 1169 euros for men and 700 euros (net) for women. These 2019 figures apply to people from the old states of Germany. You can figure out your individual pension entitlement via the German Pension Insurance (DRV) agency.


Taking responsibility for retirement

You can take this course as an invitation to take action rather than just leaving your financial future in the hands of the government. Supplemental retirement provisions are practically mandatory. You learned about Riester, Rürup, and corporate retirement provision opportunities above. You can – and should! – supplement your state pension with these common retirement plans. But there is still one more important pillar for a strong and secure retirement: private investments. More on that later too.