While Germany is debating raising the retirement age to 67 or even 70, many dream of leaving working life much earlier.

Although the idea of retiring at 40 seems almost impossible, experts point out that it is achievable, but only with extremely strict limitations and discipline.

Key: Building capital in time

If you want to retire earlier, it is essential to start building capital as early as possible, writes Fenix Magazin. According to a board member of the fintech company “Raisin”, “stocks and ETFs are essential as basic investments for long-term wealth creation.”

How much money is needed?

American economists developed a rule according to which, for retirement, you need to save 25 times your annual living expenses. According to data from the Federal Statistical Office from 2022, average monthly living costs in Germany amount to 2,846 euros, which gives 34,152 euros annually. Therefore, for retirement at 40, about 854,000 euros in savings are needed.

Risks and challenges

• Planning early retirement carries numerous risks:
• Loss of job or home, starting a family
• Stock price fluctuations
• A long lifespan means that savings must last 40 to 50 years
• Inflation can reduce purchasing power

Experts advise that the portfolio should gradually be supplemented with bonds or more stable investments in order to reduce risk.

More modest retirement: 1,500 euros per month

If you are ready to live on 1,500 euros per month, you need about 450,000 euros for retirement. This implies living in a shared or rural apartment, using a bicycle or public transport instead of a car, and modest vacations.

Is retirement at 40 realistic?

Such a goal requires exceptional discipline, a very modest life, and is usually achievable only for people with high incomes, no debts, and no family obligations. “It requires extreme discipline, a very limited lifestyle, and is more realistic for those with high incomes without debts or family obligations,” the expert concludes.