How Much Should We Save For Retirement
A few dozen years ago, hardly anyone worried about finances in retirement. This payment from the state budget was not much lower than the last payment from our workplace, so it can be said that the change in finances after finishing work was practically imperceptible. Unfortunately, many things have changed in this respect today. Anyone who is currently retiring certainly sees that the money he receives from the state budget is much lower than the last payment. And as the specialists show, this proportion will change even more, and this is unfortunately our disadvantage. In connection with this, we can expect that a lot of people will have financial problems because they will simply be short of life.
Why pensions are getting lower
Many people wonder why current and future pensions are much lower than those that were paid in the past. It consists of many factors. The first of these is the fact that we live longer and longer. In connection with this, the Social Insurance Institution must present pensioners to withdraw money longer, which, as you can easily guess, causes that every pensioner should spend more money.
Another factor affecting the amount of current pensioners is the fact that fewer and fewer people are employed. Therefore, there are fewer subscriptions for retirement pension insurance, of which premiums are paid to current pensioners. This is due to several facts. First of all for many years, less and less children are born in our country. As a result, fewer and fewer people “enter the productive age” and pay pension contributions. Secondly, a lot of people from the so-called of the productive age, left to work in other countries, especially when Poland joined the European Union. Therefore, they pay contributions just in emigration, and do not contribute to the Polish pension system.
What to do to have enough money to retire
As you can guess, if we want to live a decent life in retirement, we have to do something that will allow us to have adequate financial resources. The best solution, therefore, will be saving and investing the funds saved. How to do it? There is no unambiguous answer to this question. You can deposit money into a deposit or savings account, but you will not have large profits then. For this our money will be safe. If we want to take a bit more risk and get more profits, we can invest on the Stock Exchange or on the FOREX market. However, we are not sure that the money paid by us will come back to us. The most important thing is to do something as soon as possible. There is nothing to wait, because the sooner we start saving, the more we will save.
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How much we must save for retirement
Certainly many people wonder how much to save for future retirement. And we must immediately say that there is no unequivocal answer to this question. For each of us has different requirements and differently life after the end of work is imagined. That is why it is worth to calculate yourself how much we should save. Below, we’ll give it a very simple way.
At the beginning, we must assume what sum we would like to have after retirement. Surely no one would like to have less than our last payout. So let’s assume that we receive PLN 2,500 net on our monthly salary. As specialists say, in a dozen or so years our pension from the state budget will not exceed half of our last payment. So, it comes out to us that we will get PLN 1,250. In order for our financial statutes not to decrease, we have to make a second PLN 1,250 out of our own pocket. How much do we need for it? Let us assume that we are a man who retires at the age of 65. The average length of men in our country is 74 years. This means that we will be 9 years old when we retire. Therefore, our capital should be:
1250 PLN x 12 x 9 = 135 000 PLN
This means that assuming that a man will be 9 when retired, he should collect at least PLN 135,000 of capital. So how much do we have to save every month? It all depends on when we start saving. If at the age of 35, we will do it for 30 years. Therefore, let’s count:
PLN 135,000: 30 years: 12 months = PLN 375 per month
So if we start saving at the age of 35, we should put off PLN 375 a month each month. What will happen if we think about the future retirement when we are 50 years old? Let’s count:
PLN 135,000: 15 years: 12 months = PLN 750
If we start saving at the age of 50, we should spend PLN 750 each month for future retirement. The difference is so big and that’s why everyone can see that the sooner we start doing it, the better for us.
When performing the above calculation, two factors were not taken into account. First, saving and investing, we get a profit. Therefore, if we assume that it will be 2% per year, we will get 173,920 PLN after paying the tax. So it is much more than we expected. However, we must take into account another factor, i.e. inflation. Therefore, inflation “will take over the entire return on investment and the purchasing power of our private pension will not increase. Unless it will valorize our payments in line with inflation, then our capital will increase significantly. However, we must consider one more thing. Well, it is not said that he will live for only 9 years for a retired man. They can live and live for 20 years, so the profits from the investment will certainly be useful.
And how it looks in the case of women. Here, too, let us assume that the woman will retire at the age of 65 and her last salary is PLN 2,500. She will also get half of this amount from the state budget, that is PLN 1,250 and the remaining PLN 1,250 must be taken out of her private pension. How much does it have to save? Women in Poland live to be 82 years old. So in our assumption the woman will be retired when she lived 17 years. How much capital does it need to build?
PLN 1,250 x 17 years x 12 months = PLN 255 000
The woman must therefore have capital of PLN 255 000. How much does he have to pay for him monthly? If he starts at the age of 35 he will:
PLN 25,000: 30 years: 12 months = PLN 708
As you can see, it is a very large amount that a person earning PLN 2 500 can not afford. It will decrease when the woman starts saving at the age of 35.
PLN 255,000: 40 years: 12 months = PLN 531
The sooner we start, the less we will have to put off each month. In these calculations, for similar reasons as for men, we did not take into account inflation and possible investment returns.
We should associate retirement with a peaceful life, relaxation and implementation of our plans. But we must realize that it will happen only if we think about our retirement, or rather about its financial side, as soon as possible.