How to save for retirement and spend it on your own terms? Read and save!
Does the thought of retirement make you anxious? Don’t you want to think about what your life will be like when you stop working and start relying on a state pension? That’s a mistake, because retirement isn’t a matter of age (and not a death sentence), but rather a matter of accumulated funds. This means you can spend it on your own terms if you prepare properly. Below, you’ll find facts and figures that we hope will inspire you to look at retirement from a different perspective and approach the topic in a modern and sensible way.
In the distant past, elderly people no longer able to work were dependent on family support, ending up on the streets or in nursing homes. It wasn’t until the 19th century, thanks to Otto von Bismarck, who introduced the first pension system over 130 years ago, that states began to consider seniors and provide them with financial security.
Unfortunately, the current pension system in Poland and the money paid out as part of the pension should not be treated as the main source of income in the future, but only as a supplement to income obtained from other sources.
Our grandparents and parents grew up in a reality that not only did not favor investing, but also did not support financial education and the passing on of good habits to subsequent generations.
In Japan, children learn to save as early as primary school, and the Japanese tourists-retirees we see in the farthest corners of the world did not get there thanks to money received from the government, but thanks to the capital they accumulated during many years of work, or which they inherited from parents and grandparents who… also saved.
It’s hardly surprising, since more adult diapers are sold in Japan than baby diapers.
Given these realities (and as you will soon see, a similar situation may soon arise in Poland), saving and investing seem to be the only right way to ensure a decent and happy retirement on your own terms.
Also read: How to start saving money? 10 proven ways .
In 2020, for every 100 working-age people in Poland, there were over 30 minors and nearly 40 of retirement age. However, a Central Statistical Office (GUS) forecast indicates that in 15 years, there will be as many as 50 retirees for every 100 workers. In turn, in 30 years, there will be as many as 75 retirees for every 100 workers, meaning that 1.3 people will be working to support the retirement of each senior citizen.
Additionally, the national average in Poland is currently around PLN 5,600, while the average Polish pension is PLN 2,500 – more than half the salary of the average Pole.
This means that if you rely solely on the government pension program, your quality of life in retirement will more than double.
Of course, emigrants can fill the demographic gap, but it’s difficult to predict with certainty what the job market will look like in 15 or 30 years. Perhaps we’ll also start thinking about retirement differently. Not as a long-awaited time of rest, but rather as an economic compulsion that will force us to work until we’re exhausted, with retirement becoming merely a backup for seniors who are no longer physically or mentally capable of working.
The forecasts and numbers don’t look optimistic, so whether you’re 20, 30, 40 or 50, it’s time to take your retirement matters into your own hands and consider the opportunities offered by regular saving and wise investing.
It’s best to start saving and investing for retirement as early as possible. To better understand the benefits of long-term investing, consider the following example.
Three 35-year-old friends decided to save and invest for the next 30 years, until they turned 65. They agreed to save PLN 400 each month, which translates to PLN 4,800 annually. Their chosen investment method offered an average annual return of 7%.
The first one started saving immediately. Over 30 years, he saved PLN 144,000 (PLN 400 x 12 months x 30 years), and thanks to a 7% rate of return, he accumulated PLN 485,151 in capital.
The second friend decided to start saving only after a year. He saved a total of PLN 139,200 (PLN 400 x 12 months x 29 years), and thanks to a 7% rate of return, he had a capital of PLN 448,612. Although he “saved” PLN 4,800 (not saving in the first year), he ultimately lost PLN 36,539! (PLN 485,151 – PLN 448,612).
The third one stopped saving for two years, saving a total of PLN 134,400 (PLN 400 x 12 months x 28 years) and ending up with PLN 414,463. Although he “saved” PLN 9,600 (without putting aside PLN 400 per month for two years), compared to his friend who started saving immediately, he ended up with PLN 70,687 less! (PLN 485,151 – PLN 414,463).
The above example perfectly illustrates why it’s worth starting saving and investing for retirement as early as possible. The earlier you start, the less you have to sacrifice. For example, if you wanted to accumulate PLN 1,000,000 in your account by age 60:
– at the age of 25 you would have to save about PLN 2,381 per month,
– at the age of 35 it would be about PLN 3,333 per month,
– and at the age of 45 your monthly savings would have to amount to PLN 5,556.
A lot? True. However, remember that besides saving, which is worth starting today, you also have the opportunity to leverage the effect of compound interest and multiply your savings, for example, through automated ETF investments offered by our Mooninvest platform.
Also read: What is the magic of compound interest and why you should start saving today?
Let’s get back to our goal – securing a comfortable retirement. Using our investment platform, Mooninvest, you have the opportunity to multiply your savings at a faster pace. How is this possible? By investing in ETFs, which are among the safest investment options, offering high returns, low costs, and the power of compound interest. Interested? You can read more about what exactly ETFs are in our guide: ” ETF – What is it? A Compendium of Knowledge ,” and detailed information about our platform can be found in the ” How does it work? ” section.
