Sounds nice, doesn’t it? Who wouldn’t like the idea of entering “economic retirement” a few years earlier. I don’t know anyone who would smile and say: “That’s great, now I’ll be working for 40+ years, paying all those mandatory contributions, and I don’t even know how big my pension will be.”

But let’s admit it – economic retirement is not for everyone. Several basic conditions must be met.

• You need to be young – I understand age is how you feel, but if you’re around 50, have spent everything you earned all your life, and saved a maximum of 500 CZK (≈ 20 EUR) into a pension plan, then it probably won’t work out.

• You need money – I won’t go into exact amounts, because “enough” means something different to everyone. But without money, it’s simply not possible.

• Discipline – if you really want it, you must do something about it. It won’t just happen. And if, after 10 years, you blow your savings for this goal on a trip around the world, you’re back at square one – ten years older, or with ten years less time. Depends on how you look at it.

How to Retire Young and Wealthy?

There are several paths to this goal. Some are clearly defined, others a matter of chance. Some require luck, others time. Let’s look at a few examples:

• Winning the lottery – for example, in Eurojackpot your odds are 1:139,838,160. Well, worth a try.

• Marrying well – just beware of the prenuptial agreement.

• Being born into a wealthy family – only, that’s not in your control.

• Entrepreneurship – a good path, though a lot of hard work, especially at the beginning. But if it works out, you’ve made it. To be clear, by entrepreneurship I don’t mean switching from employment at 30,000 CZK (≈ 1,200 EUR) a month to self-employment doing the same work for 40,000 CZK (≈ 1,600 EUR) a month. In that case, better stay employed. We’ll cover that in another article.

• Building capital – systematically working toward your goal and giving money time to work for you. This is the path you can influence, and the way to reach your goal whether you are employed or an entrepreneur.

And Now, a Few Numbers

Can you guess how long it takes to accumulate 1,000,000 CZK (≈ 40,000 EUR) with regular investments of 10,000 CZK (≈ 400 EUR) per month and an average annual return of 6%?

Correct, it’s 6 years and 9 months.

And do you know how quickly you’ll get to the second million under the same conditions? In 11 years and 7 months.

Yes, you noticed correctly – the second million will take only 4 years and 10 months.

We could go on and on. The point is that the hardest million is the first one.

If we sum this example up: if you stick to it for 30 years, you can retire with capital of over 10,000,000 CZK (≈ 400,000 EUR).

If the same return is maintained, that gives you a nice annuity of 50,000 CZK (≈ 2,000 EUR) per month. If you start at 20, by 50 you can retire comfortably. All it takes is a bit of discipline.

Many Possible Paths

Of course, regular investments are not the only path. Other options include, for example, buying investment apartments and renting them out to create passive income. And the value of real estate tends to rise over time, as you can see in the chart below.

Source: Czech Statistical Office

A Final Word

I know that if you’re 20, you might think that people at 50 are “ancient,” and I won’t try to convince you otherwise. But you will be 50 one day, and it will be up to you whether you’ll have enough to enter economic retirement or not.

If you’d like advice or to discuss which path is best for you, don’t hesitate to contact your advisor at Stone & Belter. We’ll assess your situation individually and find a tailored solution for you and your family. The sooner, the better!

Note: All amounts in CZK (Kč) have been converted to EUR at a fixed exchange rate of 25 CZK = 1 EUR.