The rule of 10 can help: how much money should i save at what age?

There is no simple answer to the question how much money you need in old age. There is a simple rule of thumb for this, the rule of 10. We tell you how much money you need for a quiet retirement.

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How much do you need to save if you plan to have a nice, comfortable retirement without having to hunt for deposit bottles every day? This question is on the minds of many people. Even the experts at Fidelity Investments. Accordingly, they have thought about and developed a formula.

The whole thing is based on the assumption that a person will save 15 percent of their income each year starting at age 25, invest an average of more than 50 percent of their savings in stocks over the course of their lifetime, and retire at age 67. The goal is to maintain your pre-retirement lifestyle in retirement. Although the model cannot be transferred 1:1 to Germany, the quintessence is still interesting.

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Target: Ten times last year’s income

Based on these assumptions, experts estimate that 10 times your pre-retirement income by age 67, along with other measures, should help ensure that you have enough income to avoid financial cuts in retirement. A concrete example: If you’re about to retire, 50.000 per year, you should invest 500.000 euros on the high side have. Puh- sounds like a lot.

The Fidelity experts also find. However, they try to reassure by writing: After all, you would have many years to reach this goal. They suggest to proceed as follows: Save at least 1x your annual income by age 30, triple by 40, six times by 50, and eight times by 60. But that’s just a rule of thumb, he says, depending on when you plan to retire, what your entitlements are and how long you ultimately live.

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Life is not an Excel spreadsheet

The problem with this rule of thumb: Life is full of surprises, both negative and positive. It would be fantastic if everyone could put aside one or more years’ income over the course of a decade, but unfortunately this usually only works in theory. Crises, children, illnesses are about issues that make it impossible to stick to such a plan. Fluctuations in the savings rate are completely normal. In addition, there are other factors that are beyond our control: the development of the economy, stock market prices, luck and bad luck.

Every retirement plan is based on assumptions. Most of these assumptions will prove to be wrong over time. But that is all right. Uncertainties are part of the process. For this reason, you should not let yourself go crazy. The most important thing you should do as a young person is to start saving in the first place.

The earlier, the better. The earlier you invest, the more time you have to successfully build wealth. Broadly diversified funds and ETFs are ideal for this purpose. If you invest for decades, you will have enough time to face crises and take advantage of upward phases. Moreover, you profit from the magic of compound interest. So profits you earn through interest.

The earlier you invest, the more you benefit from this effect. In short, it’s never too early to invest in your future – but it may be too late at some point. The only question is: How much should you save?? Our recommendation: If circumstances allow, your savings rate should be in the double-digit percentage of your net income, at least 10 percent. 10 percent is reasonable, but of course 15 or 20 percent is even better. However, should you actually manage to invest an average of 10 percent of your income wisely, you should definitely be in a good financial position in retirement.

What your retirement looks like is at least financially in your hands. The sooner you get to grips with the issue, the better.

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