What to do now to get passive income in old age

Perhaps in 30-40 years the state will start paying good pensions. Perhaps the children will take care of you. Perhaps, communism will come abruptly in the country and no one will need anything. Anything is possible, but with such hopes you only relieve yourself of responsibility for your future and shift it onto someone else.

Instead, you can take simple steps now to help you live your life in retirement. And compound interest will help in this.

What is compound interest

Let's imagine Andrey. Andrey is 30 years old. He saved a million rubles and put it on a bank deposit at 7% per annum. A year later, the initial million and 70,000 rubles of interest are on his contribution.

A year later, Andrei again receives his 7% per annum, only now they are credited not for 1,000,000 rubles, but for 1,070,000 rubles. In the second year, he earned 74,900, not 70,000 rubles.

Andrey launched a compound interest mechanism: the bank charges interest on money received from interest.

In 35 years, Andrei will turn 65 and he will retire. By this time, his contribution will be almost 10 million rubles. Each year, these 10 million will give an additional 7% - this is 698,000 rubles a year or 58,000 rubles a month.

Please note: Andrey simply put money on the deposit and did nothing else. And if he added 9,000 rubles a month to his account, he would have almost 26 million capital and 140,000 rubles of passive income per month in addition to his pension.

You don't have to start with a million. If Andrey had started saving 12,000 rubles a month from scratch at the same 7% per annum, in 35 years he would have had 20 million rubles of capital and 109,000 rubles of passive income.

How to calculate your future passive income

We have prepared a table that will calculate passive income with your parameters. Enter the amount you plan to save, start-up capital, contribution percentage and age - get the amount of capital for retirement and the amount of monthly passive income.

To enter your values into the table, copy it to your Google Drive.

Count →

What questions may arise

What about inflation?

Inflation will certainly affect your savings. 100,000 rubles a month today and in 35 years is different money. But this is no reason not to postpone, because even after 135 years, 100,000 rubles a month is more than nothing.

Inflation can be overtaken. You don't have to put money on a 7% deposit. You can delve deeper into the topic of investments - buy safe stocks, government bonds - and get out, say, at 12% per annum. It is more difficult than just leaving money in the bank, but it doesn’t require extra effort.

Also, no one bothers today to save 10,000 rubles a month, in 10 years - 15,000 rubles, and in 20 years - 25,000 rubles. Indeed, with inflation, your income also grows, and over time you will become a more valuable specialist and your salary will be higher.

What if the bank closes?

When the bank closes, the state reimburses depositors up to 1,400,000 rubles. At a certain moment, you will accumulate a much larger amount - it will be a shame to lose it. Then it makes sense to scatter capital in different places: for example, store 1,400,000 rubles each in several banks. This way you minimize the risk of losing money.

You can also store capital in stocks, precious metals, real estate - everyone chooses the best instruments himself.

And if there is a default?

Anything can happen to the economy - Russia already went through this in 1998. There are no guaranteed ways to avoid this. Adapt to the situation: do not store all your capital in one currency, follow the news and make decisions based on the current situation.

All these questions are, of course, important. Indeed, there is a possibility that you will be disciplined to save money for 20 years, and then you will lose everything in one day.

But this is not a reason not to do anything and wait for old age, and then - come what may. Make an effort now to eat well in retirement, travel, and delight grandchildren and great-grandchildren with gifts. And let the state pension be a bonus, not a means of survival.