3 important ways a financial planner can help you build a €2 million retirement fund
Research by Eurostat shows that the number of people aged 55 and above who are still working in the eurozone increased significantly between 2004 and 2019. According to its research, out of the total number of people employed in the EU, the number of workers within the age group rose from 12% to 20% during the period.
That said, the rise of the FIRE movement (Financial Independence Retire Early) in Europe suggests that not everyone wants to be working when they reach 55. While it’s still relatively small in Europe, FIRE aims to achieve early retirement through frugal living, extreme saving and higher-risk investing.
To discover more about how the FIRE movement relates to financial planning, please read our informative blog.
If the idea of frugal living and “extreme saving” doesn’t appeal, you may need to build a significant retirement fund if you want to finish work earlier in life. For example, if you hope to stop working when you reach the age of 55 and enjoy a high standard of living, a €2 million retirement fund could be a target to maintain your lifestyle.
While this is ambitious it’s not impossible. Read on to discover three clever steps you could take to help achieve it.
1. Work with a financial planner who specialises in expats
As an expat, your financial needs may be different to others. For example, you may move to other nations within the EU as part of your career, which will mean your income becomes subject to different tax rules.
If this results in an unexpected and significant tax charge, it could derail your retirement strategy, meaning you may fall short of your €2 million target. Working with an expat specialist who understands the different tax rules in Europe could ensure you’re as tax-efficient as possible, no matter where in the EU you’re working.
This could then help you boost your retirement savings, so that you can enjoy the lifestyle you want later in life.
2. Understand the best options for you
Different European nations typically have different pension systems, so it’s important to understand whether they could help or hinder your retirement strategy. For example, in some countries, the pension system could be very good if you live in that country for a long period of time.
If, on the other hand, you live in the country for a brief period, the system may not benefit you. This is something a financial planner who works with expats will be able to confirm.
Furthermore, they will understand alternatives that could help you to build your retirement savings more efficiently. This could include investments that may provide greater growth potential, increased flexibility around accessing your fund, and be more tax-efficient.
3. Start saving as early as possible
When building your retirement fund, one of the most important points to remember is that the earlier you start saving the better. One reason for this is that the longer you are saving, the more you can comfortably put aside for your retirement.
Another reason is compound growth, a fundamental investing concept that could provide a significant boost to your retirement fund. In short, compound growth is where the growth your money has made enjoys further growth.
To demonstrate this, you might want to consider the following. If you put €100,000 into savings and it earns 3% simple interest every year (€3,000 a year) your money will have grown by €60,000 after 20 years.
If you use a compound growth calculator, you will see that your €100,000 will have grown by €82,075.50 over the 20 years if it enjoys compound growth at 3% a year – a boost of more than €22,000!
Please note, this is for illustration purposes only, so does not consider the effects of charges or inflation. As you can see though, the longer your money is exposed to compound growth the more likely you are to achieve your €2 million target.
Get in touch
As specialists in helping expats in Europe, we would be happy to discuss how you might be able to retire at an earlier age. With our knowledge of pension regulations across Europe and the various savings and investment options, we can help you create a retirement strategy that will help you achieve your aims.
If you would like to talk to us about this, or anything else to do with your wealth, please contact us on info@blackswancapital.eu and we’d be happy to help.
Please note
This article is for information only. Please do not take action that is based on anything you read in this article until you have sought professional advice.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
