Start at 40: How to Build 1,000 € Extra Monthly Income for Retirement in 25 Years
Let's talk about numbers.
Not everyone starts early with investing. Especially women push this topic aside, telling themselves they are not good with numbers. Maybe it is uncomfortable to look at the reality of things - and you might have a sense for it already, that's probably why you avoid it. Or you might get letters from your pension fund and assume the numbers they show you must be a joke. But they're probably not. Unfortunately.
Here's the good news. If you wake up at 40 and realize your pension won’t be enough, you still have 25 years to make a big difference.
Let's assume you worked a few years and will receive some pension. And that this won't be enough to make a living when you retire. So you might want to add some extra income on top of that. Personal situations might differ vastly, but let's assume we could all need a 1,000 € extra on top of whatever we are getting from a government fund, private pension account etc.
Let’s see what it takes to create an extra 1,000 € per month by the time you retire at 65.
Step 1: How Much Capital Do You Need?
In our calculation, we want 1,000 € per month, that is obviously 12,000 € per year. And we want to know how much money we need to accrue in 25 years via investments so that we can withdraw our target cash number per month.
It is typically assumed that a 3-3.5% withdrawal rate is "safe", i.e. it does not eat into the pot of money you piled up (= the principal) and you can comfortably live off of the yield your money makes for you. It is also typically assumed - based on long periods of historical data - that the stock market (whether it is a bundle of individual stocks or ETFs) returns between 6% and 7% yield per year. This number is also typically adjusted to reflect inflation already. In other words, as long as your withdrawal rate is far below that, you're fine. Broadly speaking, but you get the point.
With a 3-3.5% safe withdrawal rate, to generate 12,000 € per year (1,000 € monthly), you’ll need:
| Withdrawal rate | Capital needed |
|---|---|
| 3.0% | ca. 400,000 € |
Here’s the formula in simple terms:
Target Capital = Desired Annual Income ÷ Safe Withdrawal Rate
In our example:
Desired monthly income = 1,000 €
Desired annual income = 12,000 €
Safe withdrawal rate = 3% (=0.03)
Target Capital = 12,000 ÷ 0.03 = 400,000 €
Step 2: How Much to Save and Invest
Assuming your investments grow at 7% per year after inflation, here’s what it takes over 25 years, starting from zero, i.e. you have absolutely no savings or investments yet:
| Target capital | Monthly saving |
|---|---|
| 400,000 € | ~500 € |
| 370,000 € | ~455 € |
| 343,000 € | ~425 € |
Step 3: What This Means
- To add 1,000 € per month to your pension, you’d need to save ~450-500 € monthly for 25 years.
- If you already have investments (say 20–30k), your monthly contribution can drop even further. In that case, the monthly investment drops to ca. 200-300€.
- This is much more manageable than waiting until the last 10–15 years, when the numbers get overwhelming.
The Key Takeaway
Even starting at 40, you can still build a meaningful pension top-up:
- Save and invest ~500 € monthly for 25 years.
- End up with ~350k–400k invested.
- Already have money saved up? Even better. 25,000 € starting capital lowers your monthly investment rate to ca. 300 €.
- That gives you a safe 1,000 € monthly income for life on top of your pension.
It’s never too late to start, but the earlier you do, the lighter the lift becomes.
