Module 12 · Pensions and retirement
Financial independence and later life
How the savings rate sets the timeline to financial independence, the risks of spending savings down, and how powers of attorney, wills and inheritance protect you and your family.
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In this lesson
- Calculate a financial-independence target and see how the savings rate sets the timeline
- Describe the risks of spending savings down: sequence risk, inflation and longevity
- Explain what a power of attorney and a will do, and why they are made while you are well
- Describe how compulsory shares and inheritance tax work in Slovenia
Ela, 40, wonders when she could stop needing a salary. At the same time her father, 78, is forgetting small things and asks her to “sort out the money one day”. Both questions are about the same thing: planning for later in life.
Financial independence
(FI) means your investments can cover your living costs. Many people use the idea not to quit work, but to gain freedom to choose their work. A common target is 25 times your yearly spending, which matches a 4% withdrawal rate.
The key number is the savings rate: the share of take-home pay you save. Spending less works twice: you save more and you need a smaller pot.
| Savings rate | 10% | 20% | 30% | 40% | 50% | 60% |
|---|---|---|---|---|---|---|
| Years to FI | 51.4 | 36.7 | 28.0 | 21.6 | 16.6 | 12.4 |
These figures assume a 5% return above inflation, a 4% withdrawal rate and zero starting wealth. They are very sensitive: at a 3% real return, a 25% savings rate takes about 40 years instead of 32.
Spending savings safely
Turning savings into income is harder than saving. Three risks matter:
- : bad returns early in retirement hurt most, because you sell low to fund spending.
- Inflation: a fixed €1,000 a month is worth about €554 after 20 years of 3% inflation.
- Longevity: living longer than your money lasts.
Tools include a cash buffer of one to three years of spending, flexible spending that falls after bad years, and a lifetime annuity. Morningstar’s base case for 2026 puts a safe starting rate at 3.9% for 30 years.
Protecting yourself and your family
A lets someone you trust act for you. An ordinary one may end if you lose mental capacity; a continuing or lasting one is built to keep working. In the UK it is called a lasting power of attorney and must be registered; in the US a durable power of attorney. It has to be made while you still have capacity. Otherwise, families in Slovenia may need guardianship through the social-work centre and the courts. Ask a notary or lawyer what is available in your country.
A states who receives your property after death. Without one, the law decides who inherits ( by law). In Slovenia, close family have a compulsory share: one half of what they would inherit by law for descendants and the spouse, one third for others. Digital accounts need planning too: use legacy contacts, keep a secure list of accounts and never write passwords in a will.
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