No confidence in your pension? So prepare for old age with small amounts

Consumer prices only rose by 1.9 percent from August 2023 to August 2024, but this value is deceptive. Since 2020, inflation in Germany has been around 20 percent, and for food it has even been 34 percent. This has an impact on Germans’ retirement provision. 37 percent now stated that they invested less in private provision than in the previous year due to inflation. In 2023 it was still 32 percent. This emerges from a survey by the opinion research institute YouGov on behalf of the insurance company Axa.

YouGov also asked about the amount of money that Germans save on average. The majority are between 100 and 400 euros per month. 14 percent put less away, only 11 percent more. The type of system does not matter. Life insurers are reporting declining premiums and contracts, as are banks for stocks and bonds. The share quota, including the proportion of Germans who have a share portfolio, fell to 17.6 percent in 2023. A year earlier it was 18.3 percent. Nevertheless, this is the second highest value since 2002.

Declining quotas in private pension provision are not linked to greater trust in statutory pensions. 80 percent said they assume that this will not be enough for them in old age. Around half of those surveyed – women slightly more than men – would also like to save more for old age than they currently do or can. Accordingly, more women than men said they were currently not saving anything. At 29 percent, the proportion of women who are afraid of poverty in old age is also higher than that of men (19 percent). The gender differences arise from the fact that women, on average, have fewer opportunities to make private provisions, as they often lack opportunities to advance in their careers due to pregnancy and child-rearing, which is why their income is lower on average. In addition, the large number of single parents are female and are also more pronounced among women.

Small contributions do help

If you feel like you should make more provision for your pension and be able to save a few euros a month for it, it can be easier than you think. As a rule of thumb, you should have the sum of three to four net monthly salaries in your account as a buffer. Every euro above that can be invested. Even small amounts of money are worth it, especially if you are still young. 50 euros per month, invested with a six percent annual return, results in around 23,000 euros after 20 years, 50,000 euros after 30 years and around 100,000 euros after 40 years.

Six percent returns can be achieved relatively easily. A DAX ETF, i.e. an automated fund that tracks the leading German index, brings an average return of around ten percent per year. However, the respective inflation rate and the withholding tax and church tax due when the money is paid out, as well as the solidarity surcharge, must be deducted from this. Net, however, you end up with the targeted return of around 6 percent. Of course, you shouldn’t rely solely on the Dax. However, ETFs on the leading indices of other countries such as the S&P 500 for the USA, the Eurostoxx for the EU or the MSCI World for the global economy deliver similar returns.

However, for many Germans it is difficult to save even 50 euros per month. After all, 16.6 percent currently live below the at-risk-of-poverty line. The delay 2023 for people living alone with a disposable income of 1314 euros per month. For a family with two children, the threshold is 2,760 euros. In addition to pensioners, those under 25 are particularly affected, especially the age group in which it would be worthwhile to start saving.

Follow the author on Facebook

Follow the author on Twitter