Home 9 Blog Posts 9 How to Win at Retirement Savings

How to Win at Retirement Savings

December 7, 2020
Bottle bank with coin saves and golden a trophy as destinations

Why retirement savings?

Many people dream of retiring with peace of mind, financial independence, or at least a level of financial security and freedom. This is not just some random or selfish goal.

Usually, when people reach a certain age, their income levels start to decrease. And when we retire, if we don’t have good passive income or retirement savings, the plummet in our quality of life might be drastic.

When we get older, we don’t want to have that financial stress. That’s why many people start planning their retirement finances while they are still years away from retirement age, earning well, and progressing in their careers.

Another reason people think proactively about retirement savings is that the population in most developed countries globally is aging – the average age is increasing steadily. This puts a lot of pressure on the state pension systems.

More and more people need pensions, and a smaller percentage of the population is working and generating revenue for state budgets. There are no signs that this tendency will diminish.

Just the opposite – it’s strengthening. This is another important reason why people think even more seriously about their retirement and plan accordingly.


When to start saving and why?

Probably the only universal answer to that question is the earlier, the better. But if you haven’t started yet, don’t worry. While it’s great if you start early, it is never too late to start planning and working in that direction.

It’s even normal that people in their 20s don’t save for retirement but do just the opposite. They tend to accumulate a lot of debt for their education, real estate, marriage, and children.

In your 30s, it’s absolutely OK to set as a goal killing all your debt. And then in your 40s to start actively saving and investing in passive income. Of course, if you can do it earlier, that is even better!

But remember – don’t be discouraged if you are in your 50s and haven’t started yet. It’s never too late!


How to plan your retirement savings?

There are two directions in which you can work. One is to actually save money, and the other is to invest money in passive income streams. Of course, they are not mutually exclusive. It’s absolutely OK, and even better, if you work on both of these directions in parallel.

Option 1: saving (and how to make it easier)

It’s hard to save for most people, so if you find it difficult,- don’t worry. You’re not alone. Nevertheless, there are several easy techniques that can help you.

Feel free to experiment and see what works for you:

  • Automatic saving – you can, for example, direct an automatic withdrawal from your monthly paycheck to go to your “secret” savings account. For example, if you arrange for 10% from your monthly paycheck to be automatically transferred, you’ll get used to having only 90% of your monthly paycheck at your disposal.
  • Another solution is to direct a certain percentage of each transaction to go to your savings account; some banks offer such service. For example, you might direct that 10% of each transaction through your card goes to your savings account. You can, of course, experiment with the percentage. If 10% is too much, you can reduce it to 5%. You’ll be surprised to see how much money you have saved after only a few years, without any conscious effort!
  • Saving insurance – saving insurance is another convenient way to save. It’s a type of insurance where, at the end of the term, you get the saved amount of money plus some investment return, which is different for each insurance company. So you get the best of both worlds: you have life insurance, and, at the same time, if you are still alive and kicking, you get your total sum plus interest at the end of the term. And the best part is that each month you see your deductions as a cost, but actually, it’s a saving!
  • Additional pension fund – in some countries, and in most European countries, there is an established and very popular practise of contributing to such funds. The installments for this additional pension fund are automatically deducted each month, so you treat them like an expense. In reality, this is 100% saving!

Option 2: passive income streams

The other direction is to invest in passive income streams. Here the possibilities are endless, so instead of writing a long list of the options, we can list a couple as examples:

  • Investing in real estate – you can rent it, and a 5-6% return per year is quite realistic. Even if you don’t have the money to buy it, consider a bank loan. Usually the interest rate is 2-3%, while your return is 5-6%. You get the math.
  • Investing in stocks – here you can choose between investing through a trading broker or hiring a company to manage your portfolio. The company will charge you a small fee, but if you look at established companies with good reputations, you can track their historical performance and choose one with good, solid returns over a long period.

How Much Should You Save?

The answer to this question depends on how much money per month you want to have at your disposal. And the answer, of course, is very individual. But again, you can do the math.

If, for example, you want $5000, or €5000 if you are in Europe, and your pension is 1.5K, then you must plan for an additional 3.5K per month. You can tailor your plan per your taste – a combination of savings and passive income, for example.


Conditions which could change your plan

When planning your retirement savings, make sure to think in perspective.

  • Should you plan for higher healthcare expenses?
  • Do you plan to travel a lot when you retire?
  • Do you plan to live in another city or even another country?
  • What is the cost of living there?
  • Would you need to still support your children or other family members?

It’s great to have a plan, but don’t become obsessed with it. Be flexible and ready to adapt it based on new realities.

Editorial Team
Guardians of your digital footprint, the DGLegacy® editorial team is dedicated to helping you protect your assets and secure your family’s future with expert insights on digital legacy planning and inheritance. Have a story to share? We’d love to hear it! Contact us at editors@dglegacy.com.