Retirement provision matters. But many people shy away from tackling it. Or they rely on expensive specialist products. And yet retirement provision can be pretty simple and inexpensive.
1) Take provision into your own hands
The provision gap between your pension and your working income, plus the loss of purchasing power through inflation: the German statutory pension insurance itself points to an additional need for provision in its annual pension statement. A state pension you can comfortably live on – that is anything but certain. In 2021, the average pension payment amount was €1,089 per month. Anyone who doesn’t want to make major cutbacks in old age has to see to additional provision. To make matters worse, classic provision products such as private pension and life insurance have lost a great deal of their appeal. Since January 2022, the guaranteed interest rate for new contracts has been just 0.25 percent. You don’t even need to set that against the current inflation rate of over seven percent to see: protecting your capital against a loss of purchasing power cannot be achieved this way.
2) Harness equity returns during the savings phase
Interest-dependent products have largely dropped out of the picture for building wealth for provision for years now. Yet the fear of the equity markets’ fluctuations keeps many from rethinking their approach to retirement provision too. It’s true that prices on the equity market sometimes fluctuate very sharply. That can be observed once again right now. But with a long investment horizon, short-term fluctuations during the savings phase are easy to weather. The prerequisite: broad diversification. quirion’s global ETF portfolios give you a stake in over 8,000 equities from over 70 countries worldwide. While no one knows exactly how any single equity will develop, the long-term trend on the stock exchanges has historically always pointed upwards.
3) Save on high sales commissions and fees
Costs are an important lever, especially for building wealth over the long term. And the differences are in some cases immense. With life insurance, you invest not only in building wealth but also pay for the insurance cover. Guarantees don’t come free of charge. On top of that, in the early years a comparatively high share of the premiums usually goes towards covering acquisition costs such as the intermediary’s commission. With equity investments, too, the range of costs is wide. With actively managed equity funds, the ongoing costs average around 1.5 percent per year. At quirion there is no sales commission, and digital wealth management in low-cost ETFs is available from 0.48 percent per year.
4) Invest conveniently
„Too complicated for me“, „no fun for me“: alongside risk aversion, these are frequently the arguments put forward against investing. Building a broadly diversified portfolio yourself is indeed not easy. Many factors have to be taken into account. We have developed an investment concept based on capital-market research that optimises the ratio of return and risk. There are ten risk profiles in total. This means that even investors with a lower risk appetite can participate in the returns of the equity markets. You don’t have to worry about anything else and gain time for what matters to you.
5) Stay financially flexible
The key thing, first of all, is to start with provision – whether with a one-off investment or a savings plan. Regular savings contributions in particular can help you to build wealth systematically – and to keep it up. But of course life circumstances can change. A drawback of many specialist provision products is then that during the long savings phase you can scarcely get at the money early. At quirion, the investment is not tied to any fixed term. You can access your wealth at any time.
