Criticisms and Dissuasions Concerning Friedrich Merz
In a recent development, Germany's Chancellor, who has a past affiliation with the Aufsichtsrat of the German branch of Blackrock, a company known for offering investment products for private pension provision, has been urging citizens to take their retirement planning seriously.
The Chancellor's approach to the pension issue has been somewhat formal on Instagram, but the message is clear: the statutory pension may not be sufficient for all citizens in the future. This stark reality was echoed by Friedrich Merz, a prominent German politician, who admitted that the current statutory pension may not be enough for old age.
Merz, in his efforts to address the pension gap, has suggested private provision as a solution, even going so far as to say it's unavoidable for young people. He proposes a regular ETF savings plan, but admits that this may not be enough to bridge the pension gap.
A user on Instagram asked Merz if they should be worried about their pension, to which he responded that they should indeed do something for their own retirement provision. He further explained that saving a small amount each month, even as little as ten euros, over a long period of time can ensure a secure retirement income.
However, a calculation shows that investing ten euros every month in a global equity ETF with an average annual return of six percent from the age of 20 would only result in 30,000 euros after 47 years, which is insufficient for retirement. This underscores the need for more substantial contributions to secure a comfortable retirement.
To achieve an adequate retirement income in Germany by investing monthly in a global equity ETF with an average annual return of 6% starting at age 20, one typically needs to save approximately 100 to 200 euros per month for 30 years. This, however, can build a substantial supplementary retirement capital beyond the state pension.
The current statutory pension system is facing immense strain, with only two contributors per pensioner today compared to six in the 1960s. Every year, over 100 billion euros flow from the federal budget into the statutory pension, yet the system is still facing collapse without swift reforms such as adjusting the retirement age.
Political leaders must present the true numbers and facts to change people's mindset regarding pensions. The Chancellor's response on Instagram was that one should not rely solely on the statutory pension, but should do enough for their retirement provision in their younger years.
Merz's suggestion of a fixed-term deposit account with current interest rates of about two percent for long-term wealth accumulation is not considered suitable for this purpose. Instead, a regular investment in an ETF could provide a more promising path towards a secure retirement.
While the former Chancellor, Olaf Scholz, regularly praised and deemed the statutory pension sufficient, the current reality necessitates a shift in this perspective. The Chancellor's pension revolution ends with the realization that the statutory pension will not be enough for many. It is now up to each individual to take responsibility for their own retirement provision.
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