Retirement: start today with the 25x rule

Whether retirement is around the corner or not yet on the horizon, being prepared is the key: it is never too early or too late to start contributing to additional savings that allow you to live your life as a retiree. with greater carefree: this simple recommendation can make it clearer what goals to set and how much to save for your retirement.

The rule of thumb of the multiplier of 25 (“25x”) theorized in William Bengen’s Journal of Financial Planning, is an easy way to estimate the total savings to be set aside as a whole by retirement based on your needs.

Key points

Calculating a priori the exact amount of money you should have saved by the time you leave the world of work may be difficult, but that doesn’t mean you can’t find an approximate goal : the 25 multiplier rule gives you a point of departure to orient yourself in this direction.


First, find out how many resources you need to maintain your lifestyle by calculating an average value of your annual expenses.
Remember that at this time, your life may not reflect well what it will be like in 30/40 years, so here are some of the main questions you should ask yourself: Will I live in the same area and house as I am now or will I move into retirement? Am I going to have children? How much will my health plan cost? Will I be traveling in retirement or will I spend more time at home?


Now multiply the idealized figure by 25 to determine the total amount you might need during your retirement life.
For example, if you want to live on 25,000 euros per year during retirement, you will need 625,000 euros saved accumulated in previous years (25,000 x 25). Obviously, this calculation does not take into account other sources of income such as state pensions, rental properties, social security or other income. In fact, some studies estimate that you will have to set aside only 40/45% of the amount obtained or, taking the example, about 250,000 euros.

At this point, finally, time and the financial markets come into play: if we analyze the historical performance of the S&P 500 index , one of the main worldwide, which follows the trend of the basket formed by the shares of the 500 US companies with the highest capitalization, we can see how on average it generated an annual performance of 7% , already taking into account inflation, or the loss of purchasing power that occurs over time.

Therefore, starting to set aside and invest for this goal around the age of 25, from the moment of the first job at the end of university and assuming 40 years of employment, a saving of 100 euros per month will be enough to exceed the threshold of 250,000 euros at the end of the career. Against a total savings of 48,000 euros, according to historical analysis, over the years the financial markets will have generated the remaining share, allowing us to be able to rely on considerable capital following retirement.


However, the time factor is essential : to obtain the same result by starting this program at the age of 35, the necessary amount to be set aside monthly must be doubled (about 200 euros per month), while more than quadrupled if starting at the age of 45: it would be necessary to save € 480 each month to reach the goal in time!

We do not give investment advice. so individuals or investors should make their own decisions. Seek the advice of a financial advisor if you are unsure of your investment. Your capital is at risk, the value of your investments can go up or down, and you may receive less than your initial investment – you shouldn’t invest money you can’t afford to lose.


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