Private Pension Plan Financial Case

Retirement planning for a 45-year-old professional investing €250,000 for retirement at age 68

Executive Summary

Client Profile

Current Age: 45 years old (in 2025)

Retirement Age: 68 years (planned retirement in 2048)

Career Timeline: Started working at age 30 in 2010

Current Annual Salary: €81,600 (age 45)

Healthcare: Private health insurance (PKV) with €700/month premium at age 45

Initial Investment: €250,000 lump sum (no additional contributions)

Investment Strategy

Investment Horizon: 23 years (2025-2048)

Strategy: Dynamic glide path allocation with annual rebalancing

Asset Classes: Equities (global/infrastructure), Bonds (government/corporate), Gold

Rebalancing: Annual portfolio rebalancing to maintain target allocations

Tax Treatment: German tax system with Teilfreistellung for equity gains

Retirement Planning Objective

Income Replacement Goal: 90% of final net salary plus PKV coverage

Withdrawal Strategy: 4% rule for sustainable portfolio drawdown

Pension Source: German statutory pension (Rentenpunkte system) plus private portfolio

Longevity Planning: Portfolio designed to sustain income through age 95

Key Findings

Annual Income Needed

€73,157
90% of final net salary + PKV

Statutory Pension

€46,155
Net annual pension

Annual Gap

€27,003
To be covered by portfolio

Required Portfolio

€675,000
At retirement (4% rule)

Portfolio Projections

Median Final Value

€1,416,687
Pre-tax (50th percentile)

Median CAGR

7.83%
Compound annual growth rate

Success Rate

99.84%
Meeting retirement target

Conservative Outcome

€973,167
10th percentile

Portfolio Strategy

Glide Path Allocation

Dynamic allocation that becomes more conservative over time:

Age 45-50

50% Equities
40% Bonds
10% Gold

Age 51-60

40-45% Equities
45-50% Bonds
10% Gold

Age 61-68

30-35% Equities
55-60% Bonds
10% Gold

Portfolio Allocation at Age 45

Overall Asset Class Allocation (Ages 45-50):

  • 50% Equities
  • 40% Bonds
  • 10% Gold
Portfolio Allocation at Age 45
Initial portfolio allocation at age 45

Specific ETF Breakdown

Equities (50% of portfolio):

  • Core MSCI World ETF: 40% of total portfolio (€100,000)
  • Global Infrastructure ETF: 10% of total portfolio (€25,000)

Bonds (40% of portfolio):

  • Core EUR Government Bond: 20% of total portfolio (€50,000)
  • EUR Core Corporate Bond ETF: 20% of total portfolio (€50,000)

Gold (10% of portfolio):

  • Invesco Physical Gold ETF: 10% of total portfolio (€25,000)

Asset Correlation Analysis

Correlation Matrix
Asset correlation matrix for diversification

Risk-Return Profile

Risk-Return Chart
Risk-return characteristics of individual assets

Monte Carlo Simulation Results

50,000 simulation paths over 23 years with dynamic glide path allocation and annual rebalancing.

Monte Carlo Simulation
Portfolio value projections showing median and percentile outcomes

Statistical Summary

Median Final Value: €1,416,687 (pre-tax)

10th Percentile: €973,167 | 90th Percentile: €2,070,807

Median CAGR: 7.83% | Success Rate: 99.84%

Stress Testing

Portfolio resilience tested under two adverse market scenarios:

Market Crash Scenario

Additional 0.5% annual drag with 3% equity return reduction

Market Crash Scenario
Portfolio performance under market crash conditions

Stagflation Scenario

Reduced returns: Equities 6%, Bonds 2%, Gold 5%

Stagflation Scenario
Portfolio performance under stagflation conditions

Methodology and Documentation

Please refer to the github repository for more details on methodology, documentation and other details.