There are two types of people. Some say: “I should put something aside for retirement.” Others have already worked out a specific number. Guess which ones sleep better.
Most people think about retirement as an abstract idea — “someday, when I am old, it will sort itself out”. But there is one simple question that changes everything: how much money do I actually need in retirement?
Retirement is not a mystery, not a “sometime later”, and certainly not a favour from the state. It is mathematics. And that mathematics has a very specific answer.
There is the so-called The 4% rule. It says: if you withdraw about 4% from your investments each year, the money should last roughly 30 years or more. In other words, you live not off the capital you have built, but off the return it generates. The capital keeps working; you live.
The whole logic of retirement can be reduced to one formula:
And suddenly “sometime in retirement” becomes a very specific number. But there is an important nuance — this formula shows today’s value of money. And money will not become more valuable over the next 25 years; it will become less valuable, because inflation constantly eats away at its purchasing power.
Applying 2.5% annual inflation (the long-term euro area average, compounded over 25 years), the numbers look like this:
And this is usually the moment where people stop. Because the number becomes very real. And often considerably larger than expected.
If Tomas starts investing now, he will need about ~€964 a month at an 8% average annual return. But if he starts only five years later, he will need to invest about ~€1,535 a month — almost 1.6 times more.
But there is an important “but” that many people forget. This number is not your whole retirement. It is only the part investments will have to cover. If you receive a state pension, rental income or other steady inflows, they reduce the capital you need.
This is the most important part, and one that most finance blogs leave out. The 4% rule is not a guarantee. It is based on historical data, mostly from the US market, and assumes the future will resemble the past.
The biggest risk is not that the market will fall, but when it falls. If you retire and the first years are poor while you keep withdrawing, the portfolio can start shrinking faster than expected. This is called sequence risk.
Someone who understands this behaves differently:
The biggest mistake is thinking retirement is something distant. It is not. It is a number. And if you do not know it, you are simply driving without a map.
How much do you spend a month? Enter the number and see the price of your financial freedom.
There is only one question: are you moving towards your number — or just hoping that “somehow it will work out”?
Retirement capital does not build itself — it needs a strategy. I will explain how to reach your target in concrete steps, with no commissions and no product selling.