Prepare for retirement with stocks!

Persistently low interest rates are increasingly proving to be a ticking time bomb. Craft entrepreneurs should reconsider their financial retirement planning.

This article is part of the special feature on retirement planning – what's worthwhile for tradespeople.

The central banks of major industrialized nations still seem to place little importance on how entrepreneurs can secure their future financial security . How else can one explain the increasingly difficult-to-justify, persistent low-interest-rate policy, where near-zero interest rates are now considered normal? This is a proverbial time bomb, one that affected entrepreneurs may not always be aware of.

Realistic inventory necessary

Anyone planning their retirement finances should therefore begin with a realistic assessment. This includes any entitlements they may have acquired so far: statutory pension entitlements and claims from employer-sponsored benefits from their time as an employee are just as important as life or pension insurance policies often taken out decades ago.

Real estate should be debt-free at the start of retirement

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Insurance companies regularly prepare a portfolio statement. These figures provide an initial orientation for the assessment. They should be supplemented by realistic forecasts from the respective financial service providers regarding future payout amounts. Conservative value development approaches without proverbial whitewashing are importantin order to avoid having to adjust your savings goals later and potentially have to finance them at great expense.

Of course, real estate also belongs – used by the owner or rented out as investment properties – to the building blocks of financial retirement planningAs far as possible, they should be completely debt-free by the time they eventually retire. It's also a good idea to build up an adequate liquidity reserve to be able to finance future renovations without a bank loan, if possible.

However, debt-free real estate and assets are by no means the norm for entrepreneurs. In fact, financial reserves are often insufficient to maintain current living standards, as liquidity is often reinvested in the business. Your own additional pension provision is therefore often essential.

Speculative investments for wealth creation?

The entrepreneur's risk tolerance plays a crucial role in their investment decisions. For example, anyone who isn't convinced by stocks or investment funds should at least reconsider their doubts. Without more speculative investment options, building wealth will hardly be possible in the foreseeable future. One's own need for security can be addressed by adjusting the speculative portion of the portfolio over the years.

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"Invoice that cannot be verified"? The customer must provide a sound justification.

Furthermore, a thorough and, above all, regular review of the originally defined investment goals is advisable . The current asset balance, including each individual investment position, should therefore be updated and reviewed at least twice a year. A tax advisor can assist with this. Your bank or other financial partners should also be asked for their (hopefully largely objective) opinion.

The "Magic Triangle" of Investment

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The "Magic Triangle" is an important investment principle. It involves the three essential factors of an investment: security, interest and availabilityThe magic lies in the fact that it's almost impossible to reconcile these three factors. This means that, for example, an interest rate that's not in line with the market or is too high will fundamentally compromise the security of the investment. Anyone who wants to access their money in the short term must be willing to forgo higher interest rates, which are generally only possible with longer terms.

Investors and savers who deal with these interrelationships and interdependencies can at least lay the foundations for commercially sensible investment behavior.

Checklist: You should clarify these points with your financial service provider in a timely manner!

1. Together with your investment advisor, clearly define in your risk profile the extent to which you are willing to speculate;
2. Make it clear that you value balanced offerings that don't just focus on those investment products that, for example, your bank wants to get rid of from its own portfolios. It's long been possible to supplement your own product range with (good) products from competitors;
3. Set binding rules for the costs you will be charged, especially for transactions (purchases and sales) and for the safekeeping and management of your assets. For cost reasons, it may be helpful to consider a (second) account and securities account with a direct bank.
4. Do not forget the connection between high interest rates or performance and the associated
5. higher risk. This also applies, of course, to the providers you work with. So, make sure you have the potential risks explained to you clearly and definitively, especially with investments that are being offered as extremely lucrative.

The author Michael Vetter is an economic consultant specializing in banking