Retirement Without Savings — A Story That Could Be Yours

What does your pension actually look like — in real euros?

A state pension is what you receive from the government after reaching retirement age, funded by the contributions you and your employer made during your working life. According to Eurostat (2023), the average gross annual old-age pension in the EU is 17,321 EUR — that's roughly 1,443 EUR per month before tax.

But averages hide enormous variation. In Luxembourg, it's over 2,800 EUR per month. In Bulgaria, it's under 375 EUR. In Germany — the EU's largest economy — the average pension is around 1,494 EUR. In Spain, 1,508 EUR. In Italy, 1,632 EUR. And the gender gap? Eurostat reported in 2024 that women's pensions are 25% lower than men's across the EU.

1,443 EUR per month. Try covering rent, food, utilities, medication and transport with that in any major European city. In Amsterdam, Berlin, Dublin or Barcelona, rent alone for a one-bedroom flat starts at 1,000–1,500 EUR.

That's the situation today. And demographic projections make it clear: it's going to get worse. Considerably worse.

Why we don't save for retirement — and no, it's not laziness

Saving for retirement means setting money aside for a goal that won't materialise for 20, 30 or 40 years. The human brain isn't wired for that. According to the OECD Pensions Outlook (2024), voluntary pension coverage remains low across most of Europe, with many workers relying almost entirely on state pensions for retirement income.

Before you think "people are just irresponsible" — hold on. The problem runs deeper.

200 EUR into a pension fund or a weekend away? Your brain screams: weekend. Retirement is abstract — the weekend is now. It's the same mechanism we explored in our piece on present bias and why saving "tomorrow" never comes.

Add to that a general lack of financial education across European school systems, and you get a continent where most people have no idea what a replacement rate is, how compound interest works, or why starting to save at 25 yields 3× more than starting at 45. Retirement becomes "a problem for later." And later arrives faster than anyone expects.

Let's be honest: if you've been telling yourself "I'll start saving next year" for several years now, the problem isn't the calendar. The problem is that nobody has shown you what waiting actually costs. So let's do that.

What does a declining replacement rate mean — in euros?

The pension replacement rate is the percentage of your final salary that your state pension will cover. According to the OECD's Pensions at a Glance 2025, the average net replacement rate across OECD countries for mandatory schemes is 63.2%. But this masks enormous differences — from under 35% in Ireland and Lithuania to over 85% in Austria, Greece, the Netherlands and Spain.

And crucially: these rates are projected to decline over the next four decades, according to the European Commission's 2024 Ageing Report. What does this look like in practice?

At a salary of 3,500 EUR — reasonable for many European professionals — a drop from 63% to 45% means losing 630 EUR every month in retirement. Over 20 years, that's over 150,000 EUR less to live on.

These figures are illustrative — your actual replacement rate depends on your country, career length and pension system. But the direction is clear: state pensions across Europe are shrinking relative to salaries. The gap is yours to fill.

The demographic cliff — who will pay for your pension?

Most European state pension systems work on a pay-as-you-go basis: today's workers fund today's pensions through their contributions. The size of your future pension depends directly on how many workers are paying in relative to how many retirees are drawing out.

That ratio is collapsing.

According to Eurostat's EUROPOP2023 projections, the old-age dependency ratio in the EU will rise from 36% in 2022 to 56.7% by 2050. In 2022, there were approximately 2.7 workers for every person aged 65 and over. By 2050, in 13 EU member states, there will be fewer than 2 workers per retiree.

The worst-hit countries? Greece, with a projected dependency ratio of 68.1%, and Italy at 66.5% — meaning roughly two retirees for every three workers. The maths is unforgiving: fewer workers, more retirees, same pot of contributions divided more thinly.

This isn't a worst-case scenario. It's the baseline projection — what happens if current trends simply continue. Fertility rates across Europe are well below replacement level. Immigration helps, but not enough to reverse the trend. The demographic cliff is already here.

The myth: 'The state will take care of me in retirement'

This is one of the most expensive beliefs you can hold. Not because it's entirely false — state pensions do exist and will continue to be paid. But because it creates a false sense of security that stops people from acting.

Nobody tells you this plainly — not politicians, not your bank, not your employer. Because nobody wants to be the bearer of bad news. But facts don't disappear because we ignore them. Replacement rates are falling. Demographics are irreversible. The only variable you control is what you do about it.

Does this mean the pension system is a scam? No. State pensions work and will continue to work. But they were designed in an era when five workers supported each retiree and people lived a few years past retirement, not a few decades. The world has changed. The system hasn't fully caught up.

How much do you actually need in retirement — and how do you calculate it?

The pension gap is the difference between your current spending and your projected state pension. To calculate it, you need two numbers: what you spend each month, and what you'll receive. Your spending tracker handles the first. The table above handles the second.

The Martia 3-Envelope Retirement Method

Retirement income doesn't have to come from a single source. Think of it as three envelopes — each covering a different layer of your needs:

How to calculate your pension gap

Say you earn 3,500 EUR net and spend about 2,800 EUR per month. Your projected state pension at a 45% replacement rate: roughly 1,575 EUR. The gap: 1,225 EUR per month.

If you plan for 20 years of retirement (age 65 to 85), that's 20 × 12 × 1,225 EUR = 294,000 EUR. Even if you cut spending by 30% in retirement, you still need around 206,000 EUR.

That sounds like a lot. And it is. But 300 EUR saved per month over 30 years at 6% annual return gives you approximately 300,000 EUR. Over 20 years — just 140,000 EUR. The difference isn't how much you save. It's when you start.

How to start — even if you're 35, 40 or 45

The best time to start saving for retirement was 10 years ago. The second best time is now. No irony — it's simple compound interest maths. And you don't need to start with large amounts.

Check your workplace pension

Many European employers offer occupational pension schemes with matching contributions — essentially free money. In countries like the Netherlands, Sweden and Denmark, coverage is near-universal. In Germany, France, Spain and Italy, it varies by sector and employer. Your first step: ask your HR department if you're enrolled and whether you're maximising the employer match.

Open a personal pension or investment account

Most European countries offer tax-advantaged retirement accounts. In Germany, it's the Riester-Rente and Rürup-Rente. In the UK, ISAs and SIPPs. In the Netherlands, the "lijfrente." In Ireland, PRSAs. The specifics differ, but the principle is the same: the government gives you a tax break to incentivise long-term saving. If you're not using one, you're leaving money on the table.

For a deeper look at European retirement saving options, see our guide to saving for retirement in Europe.

Three steps to take today — not "someday"

Don't know how to start investing? That's normal. Most Europeans don't. And that's precisely why so many rely solely on a state pension that won't be enough. You don't need to become an expert. You need to make the first transfer.

Your future pension doesn't depend on how much you earn. It depends on how much you set aside — and when you start. And the only moment you're guaranteed is right now.

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