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Pensions: Ongoing planning, not a panacea

Brigitte Miksa, Head of International Pensions at Allianz Asset Management, discusses the topic of retirement provision.

 

The more intensely workers willing to save focus on their pensions, the more confused they seem. How can we get to grips with our own retirement provision?
 

It's not easy. We differentiate, in principle, between asset accumulation and retirement provision. We often allow all kinds of short-term trends and measurements to influence our long-term savings plans. After all, you also want to be able to afford a new car sometime, or make a higher-risk investment. This is why it is advisable to carefully plan your retirement provision, and then to follow this plan unwaveringly. This should clarify two things already in the savings phase. Firstly - how will I get a regular income after I retire? This refers, in particular, to the relationship between the state pension and whatever I have to add to that myself. Secondly - how can I protect against the risk that I might live longer than is generally predicted today? The average life expectancy of newborns today is almost 78 for men and 83 for women. But it all depends on my personal life expectancy, and in this case it is better to factor in a few extra years - after all, no one wants to be left without any money when they celebrate their 85th birthday.

Brigitte Miksa: "As a rule of thumb, you need about 60 to 70 percent of the income you were earning immediately before retirement."
Brigitte Miksa: "As a rule of thumb, you need about 60 to 70 percent of the income you were earning immediately before retirement."
How much will my 1,000 euros still be worth in twenty years? Depending on the rate of inflation, it could be 900, 700 or even just 500 euros in real terms.

How much will my 1,000 euros still be worth in twenty years? Depending on the rate of inflation, it could be 900, 700 or even just 500 euros in real terms.

So how much money do I need in old age?
 

As a rule of thumb, you need about 60 to 70 percent of the income you were earning immediately before retirement. This is made up from different types of income - the statutory pension, the company pension, private retirement provision and, if available, income from private assets. It is often difficult to estimate what your salary will be when you retire, but you should start early and save for your retirement income as a long-term investment goal. I would, therefore, advise all entry-level employees to at least take out an additional government-supported policy like Riester in Germany or 401K in the US. The benefits are, quite simply, very attractive.
 

How can I already keep track of my pension amount today?
 

An indicator for the income from the statutory pension is given in the official pension information, sent annually to all those paying into the system. Similar information is also available for other forms of investment. A few people can additionally count on rental income, a little work on the side, or the lease of a small plot of land. It is important to remember that this is the gross value, which will still be subject to taxes and deductions for health and long-term care insurance. In addition, it is very important to take account of inflation. In concrete terms, how much will my 1,000 euros still be worth in twenty years? Depending on the rate of inflation, it could be 900, 700 or even just 500 euros in real terms.
 

You can use this information to take stock, and then look at how much money you will need in old age, and then decide how to fill the gap. For this, we recommend finding an appropriate adviser - we also offer qualified advice at Allianz. The important thing is to stick to it. You have to continually plan for old age throughout your life, especially when important life circumstances change (marriage, children, divorce, career interruption, inheritance...). Furthermore, as you get older, you can see your need for money more clearly, and can then adjust your plans accordingly.

As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer:

 

Petra Brandes
Allianz SE
Phone +49.89.3800-18797
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