Retire earlier: This is how much you should save every month with ETFs

People dream of being able to retire earlier. But the steadily increasing retirement age seems to be pushing this dream further and further into the distance. We explain how you can retire earlier by investing in Exchange Traded Funds (ETFs) and how much money you should save depending on your age.

What is an ETF?

An ETF is an exchange-traded index fund. It maps the performance of an index, for example the Dax. Simply explained: If the value of the Dax increases, the value of the ETF also increases. ETFs have the advantage that you invest in several companies at the same time and are not dependent on the success of a single share. This makes the investment relatively low-risk.

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There are a few parameters to consider when investing in an ETF: Your starting capital is the money that you invest once in your savings plan at the beginning. The monthly savings rate is the amount you pay into the ETF each month. The investment period is the term of your savings plan and the annual performance describes the development of your ETF. With the MSCI World, one of the best-known ETFs, the long-term return is around eight percent per year on average. The MSCI World maps around 1,600 companies from the industrialized countries.

How does the calculation work?

To figure out how much money you should put aside each month if you plan to retire in your 50s, 55s, or 60s, you first need to calculate your desired grand total — the money you need to live comfortably in retirement. The average cost of living in Germany is according to the Federal office of statistics currently at 2623 euros per month. This results in an annual total of 31,476 euros (rounded 31,500 euros).

The current life expectancy in Germany is according to the Federal office of statistics for women 83.4 years (rounded 84 years) and for men 78.5 years (rounded 79 years). To calculate the grand total, multiply years of retirement by annual living expenses.

Example: If you’re a woman wanting to retire at 50, you’ll need enough savings to have around $40,000 annually for at least 34 years (84 years – 50 years). That would be a total of at least 1,071,000 euros.

It also depends on the age at which you start saving – whether it’s 20, 30 or 40. We have calculated the whole thing for you and broken it down by year below. We used our Business Insider ETF calculator for the calculation. You can use it if you want to calculate your individual savings rate yourself. As a return, we take the eight percent that the MSCI World brings with it over the long term. We have not considered possible taxes in this calculation.

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That’s how much you have to invest to be able to retire at 50

When you start saving at age 20, you should:

• as a woman 760 euros per month invest in order to reach a total of 1,071,000 euros after 30 years.
• as a man 645 euros per month invest in order to reach a total of 913,500 euros after 30 years.

When you start saving at age 30, you should:

• as a woman 1870 euros per month invest in order to reach a total of 1,071,000 euros after 20 years.
• as a man 1595 euros per month invest in order to reach a total of 913,500 euros after 20 years.

When you start saving at age 40, you should:

• as a woman 5950 euros per month invest in order to reach a total of 1,071,000 euros after ten years.
• as a man 5040 euros per month invest in order to reach a total of 913,500 euros after ten years.

This is how much you have to invest to be able to retire at 55

When you start saving at age 20, you should:

• as a woman 425 euros per month invest in order to reach a total of 913,500 euros after 35 years.
• as a man 350 euros per month invest in order to reach a total of 756,000 euros after 35 years.

When you start saving at age 30, you should:

• as a woman 1000 euros per month invest in order to reach a total of 913,500 euros after 25 years.
• as a man 830 euros per month invest in order to reach a total of 756,000 euros after 25 years.

When you start saving at age 40, you should:

• as a woman 2690 euros per month invest in order to reach a total of 913,500 euros after 15 years.
• as a man 2225 euros per month invest in order to reach a total of 756,000 euros after 15 years.

How much do you have to invest to be able to retire at 60?

When you start saving at age 20, you should:

• as a woman 235 euros per month invest in order to reach a total of 756,000 euros after 40 years.
• as a man 185 euros per month invest in order to reach a total of 598,500 euros after 40 years.

When you start saving at age 30, you should:

• as a woman 535 euros per month invest in order to reach a total of 756,000 euros after 30 years.
• as a man 425 euros per month invest in order to reach a total of 598,500 euros after 30 years.

When you start saving at age 40, you should:

• as a woman 1320 euros per month invest in order to reach a total of 756,000 euros after 20 years.
• as a man 1045 euros per month invest in order to reach a total of 598,500 euros after 20 years.

Disclaimer: Stocks and other investments are always associated with risk. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. They also do not replace professional advice.