🧠 When retirement comes knocking

After more than 40 years working for the same bank, my dad has recently retired. The happiest one in all of this is the dog, who can't quite work out why his favourite human is suddenly around so much more, but is thoroughly enjoying it.

Funding his daily retiree circuit (park, café, beach) took a fair bit of forward planning on my dad's part.

Relying solely on his state pension? Not his style.
He knows it's at the mercy of the political winds, and he has no intention of sitting back and hoping the storm passes him by. His plan: buy-to-let property.

A flat bought years ago, and a reliable tenant who pays the rent every month.

Unlike my dad, I've steered clear of property: I'm preparing for retirement with ETFs.

So which of us has got it right? Is rent safer than a portfolio that goes up and down like a yo-yo? How much does a flat really bring in once all the costs are paid? And how do you turn your ETFs into an income the day you stop working?

This month, we're looking at the question from every angle, with two plans and two generations.

Isn't the state pension enough?

The average replacement rate of public pensions in the European Union is set to fall from 45% of the average gross salary in 2022 to 41% in 2045, according to a BCG study published in September 2026.

Only 4 points, that's not much, is it?
It is: roughly €1,600 less a year, or more than €30,000 over a 20-year retirement.

According to Eurostat, the average gross salary in the EU was around €39,800 a year in 2024. At a 41% rate, that comes down to about €16,300 a year, or just under €1,360 gross a month. Yes, gross: income tax doesn't retire when you do.

This downward trend in replacement rates is mainly down to demographics.

Today, there are roughly three workers funding each pensioner in Europe, and there will be fewer than two by 2045.

France is already down to 1.78 contributors per pensioner in 2024, compared with 2.14 in 2002, according to the French social security administration.

We're living longer and in better health (goods news!) and having fewer children. That leaves budgets stretched when it comes to paying pensions: on one side, fewer people paying in, and on the other, pensioners living longer and longer.

It's a worrying trend, which is why more and more people are taking matters into their own hands to secure an extra source of income in retirement.

And that's where our two plans come in.

My dad's plan: a flat to let

I'm going to introduce you to a fictional profile, as my dad likes to keep his figures to himself.

Hicham is 64 and lives in a small town in France. Twenty-five years ago, he bought a one-bedroom flat with a mortgage. It has been paid off for a few years now, and the flat is worth around €250,000 today.

His tenant pays him €800 a month in rent.

On paper, that's €9,600 a year in rent, but there are costs and charges to take off.

*Simplified assumption: a 30% marginal income tax rate and the French micro-foncier regime, where 30% of rental income is automatically deducted and the remaining 70% is taxed.

**In France, rental income is subject to 17.2% social charges.

That works out at just over €334 net a month.

It's a nice boost, but a far cry from the €800 we started with. Measured against the value of the flat, that's a net yield of around 1.6% a year.

What this plan has going for it

During his working life, my dad benefited from leverage: he bought a property with the bank's money, and his tenants partly paid off the mortgage for him (whenever the flat wasn't empty).

The rent is regularly increased to keep pace with inflation over the long term. And above all, my dad doesn't see his savings swing up and down with the financial markets, because a flat isn't valued every day the way shares are.

So, with a steady, reliable tenant, he sleeps soundly at night.

What makes the plan fragile

A large chunk of his wealth is tied up in a single property, in a single town. A tenant who stops paying, a façade renovation voted through by the other owners, a climate disaster, and a whole year's rent goes up in smoke.

If he needs €20,000 for his children's studies or a new car, he can't sell off the bathroom. It's all or nothing, with months of delay and fees to match.

My plan: one drawer per time horizon

Unlike my dad, I don't own any rental property. I've organised my savings around the different moments when I'll need them. So my money is sorted into three “drawers”.

For my retirement: ETFs

It's my number one goal when I invest in the stock market, because it's a good fit.

Over the long term, markets tend to rise, and I have around thirty years ahead of me. Over such a long period, dips have time to be absorbed and compound growth has plenty of time to work its magic.

With index ETFs, my savings are spread across thousands of companies in different sectors and regions, at very affordable fees.

Government bonds, for the medium term

I live in Austria, and to keep things simple I've chosen Austrian government savings bonds (Bundesschatz): securities the state sells directly to individuals.

Returns are much less exciting than on the stock market (2.45% to 2.85% a year, before tax, at the moment), but I accept that because my priority for this pot is accessible savings.

I also wanted to get familiar with this asset class, to learn how to move gains from my ETFs into investments that are less risky but pay more than a savings account.

Here's what I do for this “drawer”: the money is placed in renewable bonds lasting from one to twelve months. There are no fees, tax is deducted directly from the interest, and when the term ends I can choose to withdraw the money or renew it for a similar period.

In the UK, the nearest equivalent for this drawer would be fixed-term savings accounts or NS&I products.

(Do check the terms, fees and conditions carefully before you take the plunge!)

Savings accounts for my emergency fund

Money I might need tomorrow or next week has to be quick to access, without putting my long-term goals at risk.

Here my savings earn less than in government bonds, which is why I only keep the equivalent of a few months' expenses there.

I'd recommend (re)reading this edition on the bucket method, or page 56 of my book, if you'd like to understand better how to move money from one drawer to another as a project's deadline gets closer.

D-Day: dividends or withdrawals?

With an ETF portfolio, there are two main ways to pay yourself an income.

Option one: collecting dividends

You choose so-called “distributing” ETFs, which regularly pay out part of the profits of the companies they hold.

On paper, it looks a lot like rent: money lands in your account without you having to sell anything. The difference is that rent is set in a tenancy agreement, whereas a dividend isn't: companies decide each year how much to pay out, and in a crisis they can cut it, or even scrap it altogether.

To live comfortably on dividends alone, you generally need a very large pot, which is why it pays to start a few decades before you need the money.

Option two: selling a few units

Here you'd rather choose “accumulating” ETFs, which automatically reinvest dividends instead of paying them out.

Your portfolio grows over the decades, and you decide when to pay yourself: you can sell a small portion of your units every month, every quarter or once a year, depending on what you need, while the rest keeps working for you.

With €300,000 invested, withdrawing 4% a year comes to around €12,000, or €1,000 a month. The catch is that when markets fall, selling means letting units go at a discount, so you need some safe savings set aside to avoid selling at the worst possible moment.

So, which option should you choose?

Real-estate or ETFs? As you'll have gathered, it's down to you.

Buy-to-let gives you a regular income as long as your tenant stays and pays the rent on time. The costs are high, but you can use a mortgage as leverage to grow your wealth, and your investment is something you can touch. If tenant troubles wear you down, you can always try to sell the property to fund your retirement.

Investing in ETFs gives you flexibility. You can start with small amounts to test the water and see whether the approach suits you. If it does, you can very easily set up a regular investment plan, so you invest automatically and consistently to build the pot you'll need in retirement.

I think the only real trap here is not having a plan, when you look at all the factors piling up: ever-higher public spending on pensions, longer life expectancy overall, falling birth rates and fewer workers to fund the system.

Once again, the best plan is the one you understand and actually put in place. It's perfectly normal, even expected, that you'll adjust it over time so it keeps matching your situation and your plans.

Feel free to reply to this email, I read every single reply.

Take care,
Nessrine

Links and sources used in this edition

• Boston Consulting Group (2026). Europe's Retirement Savings Gap. bcg.com

• Eurostat (2025). Average full-time adjusted salary per employee, 2024. Reported by Euronews

• French social security administration. Demographic dependency ratio, 2024 (in French).

Important reminder: This content is for educational purposes only, not investment advice. Please do your own research before investing. Remember that all investments, including ETFs, carry risks of capital loss.