Camille Van Vyve
04 Oct 2022
How much to invest to make 1.000€/month?
Your legal and supplementary pensions will probably not be enough to maintain your lifestyle once you retire. But how much do you need to accumulate to be able to increase your future pension by 1.000€ per month? Easyvest did the math for you.
From 65 to 85 years old
Let us first take as a basic assumption that this pension will have to be paid for 20 years, which roughly corresponds to the difference between the legal pension age and the average life expectancy in Belgium.
Taking inflation into account
Due to inflation, the purchasing power corresponding to 1.000€ in 20 years will not be the same as today. Let us therefore take as a second hypothesis an annual inflation of 2%. In this scenario, the projected pension will be indexed each year.
What risk profile?
As part of an annuity plan established after retirement, a dynamic allocation is generally suggested, which implies a reduction in risk over time to avoid unpleasant surprises at a later age. We retain this assumption here.
How likely are you to achieve your goal?
Since there is no guarantee on future stock market returns, you have to base your projections on the past and determine scenarios according to their degree of probability. In the context of this blog, we retain a median scenario, with a 50% chance of success.
Conserve or consume your capital?
Another question to ask yourself: do you want to preserve your capital for your estate or will you be the sole beneficiary? This will obviously also determine the level of accumulation needed. We foresee two scenarios here: one in which you allow yourself to consume all your capital, and another in which your capital remains intact at the end of the 20 years during which the annuity is paid to you.
200.000€ for an annuity of 1.000€ for 20 years
Once these parameters have been introduced into the easyvest simulator, the following results are obtained: to generate a pension of 1.000€/month right now over the next 20 years, you must have accumulated at least 190.000€. If you want your capital to remain intact at the end of the period, you will have to invest 460.000€. For a 100% personalized simulation, do not hesitate to adapt these parameters directly in the simulator.
The sooner the better
How quickly can you accumulate 200.000€? This question obviously depends on each person's situation (age and risk profile in particular). But what is certain is that thanks to the phenomenon of compound interest – which consists of reinvesting the returns on its capital each year – a euro invested at 30 years will ultimately be worth almost four times the euro invested at 50 years. It is therefore better to start saving as soon as possible.