24 yo | ~42K savings | retirement advice

[amethyst86purple]

Hi all! So, I’m 24 yo, not married, have been working in tech since a couple years and have settled very well (job, PR, some language, drivers license etc.) in Germany’s most expensive southern city after moving from my home country. My sole focus rn is to build a nice retirement because I’m absolutely terrified by the fact that I’ll get roughly ~€2k to €3k when I retire (AT 67 YEARS OF AGE) due to pension gap.

My portfolio looks like this:

• Emergency fund: €2.5k (with very minimal monthly expenditures in case of job loss I can live off of 2.5k and JobCenter’s support for like 6 months easily)
• Security Deposit: €1000
• Stocks: €12K (Principal: ~€10.5K, mostly Tesla, Apple, Alphabet, Vanguard S&P500 IE00BFMXXD54 ETF and Core MSCI World IE00B4L5Y983 ETF)
• Checkings: ~€13k (because I’m figuring out where to put it)
• Crypto: ~€6.5k
• ESPP fund: ~€5K (could sell and easily make a decent profit, at selling time it would be €8.8K)
• RSU’s: ~€2.5k vested (grant: ~45k over 4 years)

I earn ~€4,600 euros/month netto, €3800 is my salary and rest comes from splitting rent. My rent is literally €110 for a nice central studio because I split it with some friends who work from their home country (we didn’t exceed 12sqm/person limit) and I take care of their post and everything (yes, I am splitting unequally). Soon, I’ll get promoted which will bump my base salary to €85k and additional RSU grants.

Monthly expenses wise I’m not too frugal, I’m traveling a bit and I spend mostly on eating out.

Here are some of my questions:

• For retirement I want to have a big fund that keeps growing and a certain point in time I calculate a SWR and live off of it. That implies ETFs, almost an year ago I started investing €100 each in Vanguard S&P 500 and Core MSCI world, even though it’s up since I started I’m not sure if its the right ETF for me because everyone is talking about FTSE All World in this sub reddit m. Scalable capital doesn’t me show details of how the compounded interest is re-accumulated which makes it a lot more ambiguous. Given that I’m not an expert, in which ETF should I go all in with a monthly ~€300 investment? Risk appetite wise I don’t panic sell when my portfolio is negative (HODL’d even when it went down like ~€3.5K and came back up).
• Would it be wise for me to get myself a mortgage? Current situation with the rent splitting is really lucrative but I don’t know for how long I can ride this wave. If I get married soon a ~€1800 apartment would eat a big portion of my salary with no return. The interest rates seem quite high atm and I’m not sure if locking myself in mortgage would be a wise decision.
• If I get my passport soon enough, I might wanna go to US for some time, and for my retirement I’m eyeing a LOCL country like Türkiye. In such circumstances (leaving Germany) what happens to my brokerage/portfolio? Can it get transferred? Do I need to sell everything? In case of ETFs that would just be a waste of all the time I spent investing if I have to sell or smth. Can we keep the same brokerage when we leave Germany? Can we keep investing in it like before?
• I’m not into get rich quick schemes, but I really want to grow my capital as I age, and investing huge amounts in ETFs and Stocks make sense to me. But am I missing something that I should be doing differently?

Is there anything that I can adjust? Any advice/suggestion is really welcomed. Would really appreciate it from you folks

 

[sarahturner]

@amethyst86purple No advice from me but just wanted to say that it's impressive how much you've already figured out at this young age. Keep it up!

 

[amethyst86purple]

@sarahturner Thanks for the kind words mate. I know there’s always someone to look up to but I’m grateful for what I have.

 

[clusium]

@amethyst86purple

1. That shares you have are already the main component of your ETFs. You own AAPL in 3 different ways currently. A 1-3 fund portfolio would make your life much easier, but not everyone is onboard with the bogglehead philososphy. Core MSCI World IE00B4L5Y983 is perfectly good choice, I can't see any significant different from FTSE.
2. I don't think so. 110 EUR is a great deal, and you don't know where you will end up in the next 5-10 years.
3. If you become an US tax subject, prepare for a world of pain. Most likely won't be able to transfer it and would need to close down the portfolio. It's a complicated subject. Try to find a brokerage that exist in both countries, that would maximise your chances.
4. Keep investing in diversified ETFs. I would say currently you have too much in speculative assets (mainly crypto) and individual stocks (including your ESPP and RSU). It's fine to keep some, but that's not the split I would choose. Also why keep 13k in checkings account?
5. Lastly, make sure you use all tax advantaged schemes available for you. Pension plans are often pre-tax or have other advantages, but I don't know the options in Germany. Pensions can usually stay in the country and you start withdrawing when you reach the age criteria.

 

[amethyst86purple]

@clusium That’s exactly the kind of advice I’m looking for, the 13k is sitting in my checkings because I just didn’t know in which ETF to throw it into. Although I like to play with small amounts like 1k to 3k for individual stocks but I obviously I can’t depend on this for my retirement and for that bogglehead philosophy makes sense to me.

 

[amethyst86purple]

@clusium About pension plans, my company offers that employee sponsored pension plan or smth and I’ve also heard about Reister and Rerup or something but after some basic research I couldn’t find it convincing enough but I guess I need to research more.

 

[janssenfromcanada]

@amethyst86purple

About pension plans, my company offers that employee sponsored pension plan or smth and I’ve also heard about Reister and Rerup or something but after some basic research I couldn’t find it convincing enough but I guess I need to research more.

Most of the offered products in Germany (Riester, etc.) are extremely expensive.

Employee sponsored pensions are - most of the time - not worth it. You really have to calculate the costs in detail and know all the side effects.

 

[amethyst86purple]

@clusium I also hate the fact that roughly 700 euros per month are going into the pension system which is barely going to give me any returns. I think I’d be better off throwing that kind of money into an ETF, just adding all that amount until I reach 67 would be more than enough to last decades in a LOCL country. I researched and it seems like I cannot eject from this pension unless I become self employed which opens a can of worms itself.

 

[clusium]

@amethyst86purple UK has Self Invested Personal Pension, where you can choose what you’re invested in. This is on top of the minimal government pension. Not sure if Germany has anything comparable.

 

[amethyst86purple]

@clusium I don’t think we have anything similar but thanks for reminding me that I need to maximize that part as well, I was delaying contributing to my company’s sponsored pension fund out of laziness but even if its bullshit its free money nonetheless that the company’s paying on my behalf. Thanks.

 

[chels12]

@amethyst86purple Same age, 50k savings, lower salary (3600 in addition to startup options), saving like 1600-2000 a month, living in eastern EU. Have some expensive hobbies like cycling.

110 eur rent is crazy for germany. I pay like 550 a month in a smaller city. I would say mortgage doesn't make sense for us both, for you especially. Especially if you want to move in the future.

I personally like to have 10k emergency fund at the very least. So I wouldn't have to liquidate my savings in case i get laid off or company goes bankrupt.

Would take money out of crypto and put it into ETFs. Would not buy specific stocks like TSLA or APPL, would buy more ETFs. And focus stock picking energy on your work and developing there.

German tech salaries are quite weak after some point, I would go to US if you are after money, when you are a senior developer. Don't know about tax stuff but sounds like a pain.

If there's something you want to do while young (travel, exercise, etc), feel free to spend on it. ETFs go up for the most part, but time and your youth doesn't come back. You're very fortunate to have this money while you're young, if you can spend it responsibly on experiences then go ahead!

 

[amethyst86purple]

@chels12 Nice to see your progress as well champ. Good job.

I travel every chance I get, have been lucky enough to visit 12-14 countries so far and I never regret spending money on having experiences as long as the expenses are moderate.

As mentioned in another comment with my current expenditures and support from JobCenter I would last 6 months easily. But I will surely upsize it when my expenses grow a bit later in life.

Could you please share the ISINs of ETFs you’re investing in?

 

[chels12]

@amethyst86purple I don't know the ISINs.

XDWD, SXR1, EXXT.

 

[nomz84]

@chels12 How do you save 1600-2000 a month on 36k?

 

[chels12]

@nomz84 3600 after taxes. 4700 before.
I don't have a car. rent a cheap apartment. Don't eat takeaway. Spend like 1200-1500 a month on basics (rent + utilities + healthy food). 300-1000 some bad months goes to discretionary spending. Rest to savings.

 

[compassionate_rn]

@amethyst86purple It's looking good man.

Honestly with your living situation I wouldn't be in a hurry to get a mortgage.

Even more so if you're thinking of moving to the US in near future.

Other than that, yeah Stocks and bonds are the way to go for retirement.

I'd look into cashing out of your crypto at the next opportune moment. It might not crash and burn in the near future, but it's more likely than not to lose all it's value if you HODL it for 30 years.

It's a risky speculative investment that you can't rely on for retirement. If you want to keep it, that's fine, but don't count on it for your retirement savings.

Individual stocks are also a bit more risky but to a lesser degree than crypto.

That kind of investing should be done if you have time and knowledge to analyze the companies. If you're just buying big companies with recognizable names and just HODL it might not work out well in the long run.

Success there comes from identifying good companies which are undervalued.

The safest and most reliable way to invest without much effort is to just buy an ETF that tracks a global stock market index. It won't have you making 20X in 5 years like you might if you bought shares of Amazon when they were a small company, but you also won't lose all your money like you would have if you invested in Blackberry when it looked like they were gonna be the next new thing.

Investing in an indexed ETF is the slow and steady strategy. You're buying a slice of every company in that index, future winners and losers. But the idea is that for every 10 losers there's gonna be a winner that goes up so much that it more than makes up for them. And you don't need to guess who the winners will be ahead of time.

As for which index to pick, FTSE ALL World and MSCI All Country World are the broadest. There are also ones which track sub-sections of the global stock market like MSCI Core (which tracks companies in 'developed countries' only).

The differences between FTSE and MSCI are for example which countries they consider developed and which they consider emerging markets. This influences the % allocations to each.

You should read up on them and them make your strategy accordingly. And then stick to one strategy.

 

[amethyst86purple]

@compassionate_rn I’m not heavy into crypto, after loosing a couple grands I learned my lesson and decided not to gamble anymore, I just have some invested in Bitcoin and Eth so that I don’t miss out on any potential gains but definitely not relying on this for retirement.

I’m all up for just shoving money in a fund like FTSE all world but I definitely wonder about the people who invested in these funds like 40 years ago, are they like having a good time or is something gobs but my ass real bad.

 

[compassionate_rn]

@amethyst86purple You should definitely look things up. I think there are tools where you can backtest any kind of portfolio allocation.

Keep in mind that FTSE and MSCI are indexes. Their not funds.

And it's existed for a very long time as an analysis.

There are funds that make their buying decisions based on replicating one of the indexes. They don't history all the way back as the 1900s. ETFs are even newer, most of them were created after 2010.

Still it's possible to do a backtest, you just need to factor in the administration cost of the fund. So whatever the performance of the FTSE ALL WORLD index was, you need to substract a bit. But you can calculate what investing 1000 into a fund like that 40 years ago would be worth today.

 

[ximay]

@compassionate_rn Any point targeting US based ETF? It seems like it's not possible anymore or something.

Those you mentioned are less attractive than SPY for example from what I see. But I don't know much..

 

[compassionate_rn]

@ximay There are european versions of US based ETFs (look up UCITS).

I only mentioned the indexes. There are different funds that follow the same index, but they might be denominated in different currencies, different expenses ratios, different mode or replication of the index and they might be based in different countries which would affect taxes. Due your dilligence when picking.

As for being less attractive than a fund that tracks the S&P500, sure, it looks that way. But past performance doesn't predict future performace.

The US has had a good run in the past 20-30 years, but there's no guarantee that it will continue that way.

Investing in a global index ETF means you don't have to worry about what one particular country is doing, you're invested in all of them, proportionally to their market weights.

Right now US stocks make up about 60% of the global stock market. But if in the future that becomes 50% or less, that means to some of the other countries have made more gains than the US. By just holding the global ETF, you get to hold that new proportion too, without doing anything. The ETF buys more or less of each stock so that the proportions match the index.

This isn't about chasing gains, but about easy diversification. Diversification is mitigates risk.