What is the benefit of a savings plan after 20 years ?

Share savings plans are the second pillar of wealth accumulation alongside real estate. If you have enough confidence and discipline, you can save €300 a month in a stock ETF at a low-cost online investment bank.
How high will the assets be after 20 years?
And what amount can one then pay out monthly?

A complete stock market cycle takes forty years. A bull market lasted in the past sometimes 20 years, sometimes 30 years. The following bear market 10 years or a longer sideways phase 20 years – depending on the width of the ruler.

The different results of savings plans in equity funds or equity ETFs are correspondingly large. For example, in the upswing initiated by Reagan in 1981, a €300 savings plan would have accumulated a whole €470,000 in assets by the peak in 2000. Lucky, who would have saved so solidly in exactly this time, but the end of the cold war was such a century event also pure saver's luck. For our consideration this phase is no yardstick, because e.g. starting from the turn of the millennium would have become from the deposits ( in sum 72,000 €) until 2020 only approximately 107,700 €. One has experienced in this time the bursting of the bubble, a substantial financial crisis and 9/11. That things didn't get worse, as they did in the 1930s, was because central banks reacted more aggressively.

Hide the "window dressing" with simulations

The historical results are so different depending on the time window that they cannot be applied to the present, i.e., they are not suitable for forecasting. Here we use the SENSIS simulation method, which is independent of past events. At its core, it is also based on current surveys of banks and asset managers on their return expectations.

Simulations independent of past values lead to more realistic results for the 300-euro savings plan over 20 years

After 10-15 years at the latest, you make up for most of the losses

From this point of view, a stock savings plan is always successful over longer periods of time, even if you have to "hold out" for 40% losses in between. In the long run they grow out, as the following chart shows. Where the light blue minimum scenario crosses the red line from bottom to top, 15 years have passed in the worst case. This is how long it takes before even a savings plan no longer has a negative return - we experienced this phase in the recent past between the years 2000 and 2015.

Translated with (free version)

Stress does not stay away even in good times

So much for the theory proven by the past. But even in "normal times" the stress increases with increasing wealth, then when the annual fluctuations far exceed the amount saved and the personal, monthly income. Without expert advice, an investor then usually finds himself in distress, unless he has a high degree of resilience, understanding and coolness.

The following chart shows how with increasing wealth accumulation this fluctuates considerably more. If it was still a few thousand euros at the beginning, a savings plan with increasing years quickly generates asset fluctuations of 10,000 or 20,000 euros per year and even more. This generates initial, unscheduled flight reflexes, a non-rational inclination to sell, which counteracts the idea of the savings plan. Emotional interventions then usually reduce the return sharply, even for professionals.

What is the benefit of a savings plan in old age?

In this analysis, we assume the most probable value of the €300 savings plan after 20 years: approx. €150,000 in assets. We continue to hold 100% shares and come to the following results with the help of the SENSIS® simulation:With a withdrawal of 700 € (1st chart below) monthly, the assets of 150.000 € can be preserved on average.With a withdrawal of 1.000 € (2nd chart below) monthly, the assets are probably used up after 20 years. In the quite rare best case the fortune remains and worst case it is already used up after 12 years.

Conclusion: Stock savings plans are worthwhile at any time.

  • With 300 € monthly one reaches after 20 years 700€ distribution for further 20 years, which are on the one hand very surely "consumable" and even not improbably thereby the nominal fortune receipt.
  • If one takes 300€ more, i.e. 1.000 €, then it is obvious also for laymen that the fortune is consumed in the same way after further 20 years, as it was saved before in 20 years.
  • The fact that an additional €400 is "created" from €300 after 20 years is strongly related to the high expected return of 6.5%.
Einverstanden (I agree)
Nicht einverstanden (I do not agree)
“Mit dem Aufruf der nachfolgenden Seiten bestätigen Sie, dass Sie professioneller Investor sind und dass Sie weder US-Bürger (gemäß US Securities Act 1933) sind noch Ihren Wohnsitz in den USA, Australien, Kanada, Japan oder Großbritannien haben.

I hereby confirm, that I am professional Investor. I also declare, that I am not US-resident (according to US Securities Act from 1933) and I do not live or have residence in USA, Australia, Canada, Japan or Great Britain.”

Einverstanden (I agree) Nicht einverstanden (I do not agree)