Is private retirement provision still worthwhile from 50?
The answer to that is: a clear yes! At 50 you still have 17 years in Germany until the regular retirement age (anyone born from 1964 onwards can draw the standard old-age pension at 67 without deductions). This span of time is definitely enough to make the return opportunities of the capital market work for you. In addition, many people from 50 benefit from certain advantages that make investing their money easier:
- The children have often left home and are already in employment.
- Mortgages are often paid off.
- In many cases the job position is well established and not infrequently well paid.
This gives many people over 50 the opportunity to set aside higher savings amounts for retirement provision than in earlier years – an important point for offsetting (at least in part) the disadvantage of the later start to your private retirement provision.
What should women in particular bear in mind when it comes to retirement provision?
For women, private retirement provision plays an even more essential role than for men. Because of time spent caring for their own children, women often lack important contribution years for the statutory pension insurance (even though child-rearing periods are taken into account for the pension). Women are also more often employed in lower-paid jobs than men, which additionally has a negative effect on the accumulated pension points (the central calculation basis for the level of the statutory pension). In our guide we reveal how women can take their retirement provision into their own hands. >
How do I concretely tackle my retirement provision at 50?
1. Get an overview of your financial situation
How high is your statutory pension likely to be? What other income is available to you (company pension, private pension insurance, etc.)? How much money will you probably need as a pensioner in order to maintain your current standard of living? In this way, find out how much money should be available to you in total when your pension begins and how much you would actually need. Then, in the next step, you can look at your options for offsetting any shortfall that may exist – your pension gap.
2. Make full use of the three pillars of retirement provision
The 3 pillars of retirement provision are made up of the statutory and company pensions as well as private retirement provision. Make the best possible use of the opportunities the three pillars offer:
- Statutory pension: The longer you work and the higher your salary, the more pension points you accumulate. Pension points, also called earnings points, are the central calculation basis in the statutory pension insurance and largely determine the level of the pension. When it comes to your retirement provision, however, you should on no account rely solely and exclusively on the statutory pension. It is often not enough to ensure your accustomed standard of living in retirement.
- Company pension scheme: If your employer offers a company pension scheme (bAV), use it. Among other things, it comes with the following advantages: a reduction in your tax and social security burden, an employer contribution, and entitlements from bAV contracts are transferable when you change jobs. The additional bAV contributions can help to close your pension gap at least to some extent.
- Private retirement provision: Be sure to supplement the statutory and company pensions with high-return, low-cost private retirement provision. ETFs (Exchange Traded Funds – exchange-traded index funds) offer you a particularly favourable ratio of return opportunities to risk for this.
3. Use ETFs for retirement provision
With equity ETFs you invest cost-effectively and easily in a large number of different companies. Bond ETFs, which are normally less prone to fluctuation than equity ETFs, in turn offer you a stabilising component for your portfolio. To invest in ETFs, you choose between:
- an ETF savings plan, to invest fixed amounts regularly (monthly) and to benefit from the cost-average effect where applicable, or
- a one-off ETF investment, if you already have a larger financial cushion (e.g. from an inheritance or life insurance policy). Studies over longer periods have shown that in the vast majority of cases it was more advantageous to invest a larger available amount immediately as a lump sum than to split it across different purchase dates. Very much in keeping with the motto: “The best time to buy is always now!”
At quirion, incidentally, you can invest in ETFs very easily, without having to take care of the selection yourself.
Opening an account with quirion is this easy:
Registrieren
Open an account
Deposit money
Claim your welcome bonus
Auf Rendite freuen!
4. Adjust your portfolio to your investment horizon
The more time you have available for your investment, the more strongly your ETF portfolio can grow with the help of a higher equity share (more profitable, but also more prone to fluctuation). The closer your retirement or the payout phase comes, the more important it becomes to cushion stronger price fluctuations with a higher bond-ETF share. At quirion, this happens automatically with the retirement provision portfolio, in that we align your portfolio more defensively for you as you get older (fewer equities, more bonds = a less volatile portfolio).
What happens in the withdrawal phase?
You can find out what matters with a withdrawal plan and why the right investment mix is so crucial, especially at the start of retirement, in our guide Withdrawal plan: how to pay yourself your ETF pension. >
5. Stay invested with discipline
Even when investing from 50, the so-called buy-and-hold principle applies: once you have decided on an investment strategy that suits you (e.g. an ETF savings plan into a portfolio consisting of a large number of different equities and bonds), it is best to pay no more attention to the short-term market fluctuations. In the long term, the markets have recovered after every crisis – not infrequently, sharp downward movements were soon followed by new highs. Precisely in turbulent stock market phases, then, calm and patience are called for, and not hectic getting in and out.
At quirion, you tell us your personal risk appetite at the start, which we take into account when selecting the ETFs for your portfolio. So you can be sure that your portfolio is always put together with the ratio of return opportunities to risk appetite that is right for you.
How to succeed with private retirement provision using ETFs from 50
Whereas with a long investment horizon even small savings instalments grow into considerable wealth, from 50 you have to compensate for this lack of a long-term investment horizon with higher savings amounts. The reason for this lies in an effect comparable to compound interest. With positive returns, this makes your wealth grow exponentially, because additional gains in value can be achieved on accumulated profits – in addition to the savings instalments. The more money and time available for this, the more powerfully the described effect takes hold.
You can easily try out how this effect works with our free savings plan calculator: test what happens to your savings instalments/one-off payments the shorter/longer your investment period is.
Retirement provision from 50: ready to start now?
At 50 it is definitely not yet too late to actively shape your financial (pension) future. You still have enough time to noticeably boost your pension with a smart ETF strategy. At quirion you get everything from a single source: scientifically grounded ETF portfolios, automatic adjustment to your stages of life, low costs, broad diversification of investments and full flexibility. Don't wait any longer – the right time for your retirement provision is right now!
