You might still be thinking, "retirement is still a long way off, I'll save later." But that's precisely the trap. The sooner you start, the lighter the burden. Savings need time to grow from interest and investments.

If you start saving at age 25, a small capital can become large due to the effect of compound interest. But if you only start in your 40s, the amount you need to set aside will be much larger. The bottom line is, a peaceful retirement is the result of long-term planning.

How much is the ideal savings before retirement?

There are several ways to calculate this, but the two most popular formulas are the 25x Annual Expenses Rule and the 80% Income Rule. Let's discuss them one by one.

1. 25x annual expenses rule

This formula is used by many financial planners worldwide. It's very easy to use:

Retirement savings = 25 × your annual expenses

For example, if you need Rp120 million per year (Rp10 million/month) to live comfortably:

Then you need Rp3 billion (25 × 120 million) before retirement.

Why 25x? Because this is considered sufficient to cover expenses for ±25 years of retirement, assuming balanced interest/inflation.

2. 80% income rule

This formula calculates based on income, not expenses. The idea is that after retirement, you only need about 80% of your last salary so that your lifestyle doesn't drastically decline.

Example: your current salary is Rp15 million/month → this means you need about Rp12 million/month after retirement.

If you want to live off interest or investment returns, just calculate back how much capital is needed to generate Rp12 million/month.

Retirement savings simulation example

Also read: How to save money properly so your balance doesn't just pass through

Tips for preparing retirement savings now

1. Start small, the important thing is to be consistent.

Saving Rp500 thousand per month is better than waiting until you can save Rp5 million but never starting.

2. Separate retirement savings from your main account.

Use a digital bank or a special account so it's not used for daily needs.

3. Utilize interest and investments.

Savings with high interest, deposits, or money market mutual funds can help your money grow steadily.

4. Increase savings amount every year.

Every time your salary increases, also add to your retirement savings.

5. Avoid consumer debt.

If you keep adding installments, your retirement fund could be eroded before it has a chance to grow.

The short answer: ideally, you should have retirement savings equal to 25x your annual expenses. But the most important thing is not the nominal amount, but consistency in saving and the time you have.

Start now, even if it's a little, so you can enjoy your retirement without financial stress later.

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Frequently Asked Questions

1. If my salary is small, how can I start retirement savings?

Just start with a small amount but be consistent. As soon as you have additional income, add a little bit at a time.

2. Is regular savings enough for retirement?

If the interest is low, it's usually not enough. It's best to combine it with safe investment products like mutual funds or deposits.

3. How important is insurance for retirement?

Important. Health and life insurance can protect retirement savings from unexpected costs.

4. When is the best time to start saving for retirement?

Now. The sooner you start, the smaller the amount you need to set aside each month.

5. Can retirement funds be withdrawn before retirement age?

It depends on the product you choose. But it's best not to; let the savings grow until you really need them.