Does building a pension still make sense? Alternatives for people in their twenties and thirties
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The population is ageing, retirement age is shifting and life is becoming more expensive. Who is now twenty or thirty, rightly wonders: can I still count on my pension later? And does investing in shares make sense when the system comes under pressure?
Waiting for your retirement age feels less like a plan
For decades the route seemed clear: work, build up pension and stop as soon as you reach retirement age. For younger generations, that certainty is less self-evident. There are relatively more elderly people, while a smaller working population has to bear the cost of pensions and care, among other things.
That does not mean that all pensions will disappear tomorrow. It does mean that blind faith in one future benefit is a risk. The more sensible question is therefore: how do you build up enough freedom of choice not to be entirely dependent on retirement age?
Is the pension system going to collapse?
A complete collapse is not a fixed future scenario. In addition, pension schemes vary considerably from country to country. In the Netherlands pension usually consists of three parts: the AOW of the government, supplementary pension through the work and assets that you build up yourself. Employers' pensions are invested to a large extent; they are not simply a pot from which current workers pay directly all current pensioners. Government: pension structure.
The pressure is real. Ageing increases the costs for governments. The Dutch AOW age is in 2026 and 2027 67 and rises in 2028 to 67 years and three months. For many younger people, their final AOW age is not yet definitive. ECB: cost of ageing, Government: AOW age, SVB: your AOW age.
That's why the most useful assumption isn't I'm not getting anything later, but I want to be able to make ends meet if I get a pension later, less or different than I'm expecting.
The main goal: capital before retirement age
Someone who wants to work less in their fifties or sixties faces a different challenge from someone seeking extra income only after retirement. They need money for the years before their AOW and regular pension begin.
This makes freely available capital important: savings, investments or income from a company or rental that you can access earlier. Supplementary pension investments may be attractive for later, but the tax rules make them less freely accessible.
The two goals can perfectly co-exist. One gives you freedom before the official retirement age; the other helps you afterwards.
Are stocks still wise if the economy can collapse?
A stock market crash and a permanent collapse of the economic system are not the same. Shares can drop rapidly in a short time. Those who need money for rent, a home or livelihood can be forced to sell at a bad time.
But a share also represents an interest in a company. If companies continue to produce, sell and make profits in the long term, diversified investing can still be a way to build up assets. No one can guarantee what the future proceeds will be.
Therefore, the emphasis is on spreading, low costs, a long investment horizon and investing money that you can spare for the time being. These are also key points in the information of the Dutch financial regulator AFM. AFM: practical checklist in investing, AFM: what costs invest?.
If you are considering disruption in which almost all companies stop functioning for a long time, real estate and crypto do not offer a guaranteed escape either. Tenants, banks, exchanges and digital infrastructure are also part of the economy.
Real estate: tangible, but not an automatic pension machine
A rented property can generate monthly income and increase its value in the long term. It appeals to people who want to make their future income less dependent on a pension fund or stock exchange price.
But rent income isn't the same as profit. The rent may be subject to mortgage charges, maintenance, insurance, taxes, management and periods without tenants. In addition, one property can concentrate a large part of your assets in one location.
Real estate can therefore be part of a pension strategy. The question is whether the net cash flow, after realistic costs and setbacks, fits your goal.
Crypto: possibility or pension risk?
Crypto may be a conscious, risky position for some investors. However, it is difficult to base a reliable pension income on it. The rates can fluctuate strongly and some coins can lose almost their full value. The AFM therefore warns against putting money into crypto that you will need later. AFM: risks of crypto.
That doesn't rule out a limited position. It means your retirement plan has to work if that position isn't working. Anyone who makes his financial freedom entirely dependent on one cryptocycle will trade uncertainty about the pension system for another uncertainty.
Building your own retirement savings: what are the options?
For people in their twenties and thirties, no single investment solves every problem. A solid plan combines several functions:
- A buffer for unexpected expenses, so you don't have to sell investments at the first setback.
- Employers' pension, if you build that up: check how much is actually deposited and what your expected benefit is.
- Freely investable assets for pre-retirement purposes, e.g. through a broad portfolio.
- Additional pension investments or an annuity if you have tax year space for that and can secure the money for later.
- Real estate or a company like the risks, time and figures fit you.
- Possibly crypto as a risky addition, with a size that doesn't threaten your financial base.
In the Netherlands you can view your accumulated pension via Mijnpensioenoverzicht and calculate your possible annual tax allowance using the tool of the Belastingdienst. Rules and tax benefits vary from one European country to another. Government: view your pension, Belastingdienst: calculate annual tax allowance.
The real question isn't when to retire
Suppose you want to work less on your 55e, but only years later you receive AOW and employer's pension. Then you have to calculate how much income you need in those intermediate years. That's your bridge. Only then can you assess how much you have to set aside each month and which combination of savings, investments and other income fits in with it.
Ageing is a good reason to take your future seriously. It's not proof that every pension becomes worthless or that you have to put all your money into real estate or crypto.
The strongest position for a young generation is freedom of choice: a pension that builds up, capital that you can reach earlier and a plan that also stays alive when one investment fails.