Building your own retirement income

Rok, 35, earns €2,400 a month after tax. He would like about €2,000 a month in retirement. His state pension forecast says €1,100. How big is the gap, and how much would it take to fill it?

Step by step: estimate your gap

1. Target income. Many planners use 70% to 80% of pre-retirement net income. This is a rule of thumb.
2. Subtract the expected state pension. Use your pension statement or forecast.
3. Gap × 25. If you plan to withdraw 4% of your savings in the first year, you need 25 times the yearly gap.

Employer contributions are extra pay

An occupational pension is a pension arranged through an employer. A supplementary pension is a voluntary plan on top of the state pension, for example Slovenia’s voluntary supplementary pension insurance. Employer money is among the best returns available.

• UK: auto-enrolment requires at least 8% of earnings between £6,240 and £50,270: 5% from you and 3% from your employer. On £30,000 the qualifying earnings are £23,760, so the employer pays £712.80 a year.
• US: employers often match 401(k) contributions. With a 50% match up to 6% of a $50,000 salary, a worker paying in $3,000 receives $1,500 more: an instant 50% return.
• Slovenia: premiums into voluntary supplementary pension insurance qualify for tax relief up to €3,224.18 a year in 2026.

The 4% rule

The 4% rule says: withdraw 4% of your starting portfolio in the first year of retirement, then raise that amount with inflation each year. William Bengen’s 1994 research found that, in every 30-year period of US data since 1926, a first-year withdrawal of about 4% from a portfolio half in shares lasted the full 30 years. The 1998 “Trinity study” reached a similar result for portfolios with at least half in shares.

The main limits: the data are mostly US, a long retirement may need more than 30 years, fees and taxes reduce the amount, and a crash early on is hard to recover from. Morningstar’s base case for 2026 puts a safe starting rate at 3.9% for a 30-year retirement, and lower for longer ones.

Annuities

An annuity is a contract in which you hand over a lump sum and an insurer pays you income, often for life. It protects against living very long, but it is inflexible, may not keep up with inflation, and the money usually cannot be inherited. It is insurance, not an investment.