With these rules, wealth accumulation works

Wealth accumulation also possible later in life

This is how much money you should have saved at your age

How much a person can save is very individual and depends heavily on the respective circumstances.

Be honest – how often do you think about building up your wealth, your savings and retirement? This is probably just as unpleasant a topic as the annual tax return. But the question of how high your entitlement to state pension is and how you will budget in retirement is undoubtedly important.

The more complex something is, the more you long for simple rules that you can follow. For example, the financial services company Fidelity Investments has come up with a so-called rule of ten: By the age of 67, you should have saved ten times your last annual income. With an income of around 50,000 euros, that would be a whopping 500,000 euros. This would allow the old age to be enjoyed without compromise and with an unchanged lifestyle.

Fidelity Investments’ Rule of Ten

In order to achieve this great goal, the company proposes the following intermediate goals:

  • If you are 30 years old, you should have your annual salary in the savings account.
  • By the time you’re 40, you should have saved three times your annual income.
  • By the age of 50, you should have six times your annual income in your account.
  • You should save eight times your annual salary by your 60th birthday.
  • After all, when you retire at 67, you should have saved ten times your last salary.

For this rule of thumb, experts at Fidelity Investments assume that by age 25, you’re saving 15 percent of your income annually, investing an average of more than 50 percent of your life savings in stocks, and retiring by age 67. But is that feasible?

Such rules often fail in reality.

Daniel Parthum,

financial coach

“Such supposed rules often fail in reality,” says Dani Parthum, “that’s why I’m very skeptical.” Parthum is a graduate economist and business journalist – today, as a financial coach, she primarily advises women on financial independence. This information about intermediate goals often does not match your own life situation, which is why she advises: “Forget such rules and look at your own life.”

Find reputable financial advisors

You can get advice from independent bodies on how to build up wealth. Among other things, the consumer advice centers offer financial advice. If you find a financial advisor, you can check the register of the Federal Financial Supervisory Authority (BaFin) to see if they are licensed as a financial intermediary. Alternatively, you can also ask the Chamber of Commerce and Industry who is registered as a fee-based financial investment advisor. Remain cautious and skeptical if financial advisors seem dubious to you. The Stiftung Warentest, for example, advises the “Federal Association of Independent Honorary Advisors for Non-Profit e. V.” and regularly publishes a “Investment Warning List”.

According to Parthum, very few people sit down and calculate their lives the way Fidelity Investments has laid them out. In addition, there are surprising twists, illnesses or special expenses that make such a plan fail.

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“If you are self-employed, have become a mother or have parents in need of care and can only work part-time, you have completely different conditions for wealth accumulation,” says Parthum.

Wealth accumulation also possible later in life

The “You should” style also bothers her about the rule of ten. “It’s just stressful,” says Parthum. If you’re in your mid-30s with little to no savings, reading this rule will only leave you feeling frustrated and less motivated to start building wealth. “That would be fatal,” says the financial coach. “Even at the age of 40, 45 or 50 it is not too late to build up a fortune.”

Basically, Parthum still recommends: “The earlier you start saving and, above all, investing, the better.” “It’s best to invest 10 to 15 percent of your gross income in equity funds and continue to do so until the end of your working day.” In addition, you can continue to build up your assets and invest in real estate, for example.

Anyone who starts building wealth in their early to mid-30s needs a higher proportion of their income to invest, around 20 to 25 percent of their gross income. If you don’t manage to do this, you have to look at your sources of money and expenses in a second step and make changes if necessary. For people who work independently and are not permanently employed, other savings and investment rates apply.

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