Market trends

Think tank: retirement + quality care = mission impossible

By on 9 January 2017

What should your perfect retirement look like? Just eating, drinking and a random roof over your head or would you like excellent care and to live close to your next of kin in later life? If you opt for the latter, then it could well be you need to improve your savings strategy, at least that is what a new report from the German economic think tank ‘CESifo’ says.

Since 2015, the first time in the history of the human race, more people have lived in cities than in rural areas. This disparity will just keep on widening, as organizations like the United Nations point out.

By 2050, an estimated 6.5 billion people, about three-quarters of the world’s population, will be living in cities. Thanks to digital networks, the rise of the number of ‘smart cities’ that provide the best care, infrastructure, and security will contribute to the trend.

So, relatively speaking, the chances are that you and your next of kin will also want to live in a city in the future. Fortunately, modern cities will then be organized in such a way that you can enjoy both the peace and good care at home as well as in the hospital.

Right choice needed

However, as the CESifo warns, these possibilities only are in store for just a few pensioners. Good care is expensive, as is a nice house in a city. Moreover, prices on the European housing and health care markets will continue to rise, while, at the same time particularly with traditional banks and insurers the return on savings continues to decline. Those who want to enjoy a great retirement life in the future will have to make the right choices.

Investing is obvious, but the CESifo calls this risky, especially for EU citizens. “Investor markets in Europe are smaller than in the United States, there is no real investor culture whereas losses regularly occur,”, they write. “Look at the position of the CAC 40 (the Paris stock exchange). It scored more than 6,000 points in 2000, and until now only 4,400.”

Alternatively, you can sell your house, where you might have wanted to grow old in. You can then move to significantly cheaper housing in rural areas and largely use the capital gain for your old age, but (far) away from your next of kin. Alternatively, you settle for less comfortable living in a smaller house in the same city, at least, if you can score off other retired potential buyers. In either case, the interest on the capital gain is not tax deductible.


Whatever you choose to do, investing or selling your house, in any case, you choose uncertainty according to CESifo. Uncertainty about the return on your investments, or uncertainty about whether your home sold will provide you sufficient capital to lead the life you and your next of kin want to lead. The think tank expects an increase in uncertainty in the investor market, because by aggressively buying up corporate bonds the European Central Bank is currently taking many interesting investment options of the market.

There is still one option left: to save. However, CESifo states that if you want to do so, you should not turn to the traditional banks. For years now, many traditional banks and (life) insurers hardly manage to get a return on their investments. So, they now prefer to take on fewer savings and reduce the interest on savings even further. Now it looks like the Dutch and other Western European banks are even heading for negative interest rates. You will then even have to pay for your savings. In Germany, this is already happening.



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Bas van Essen

Savingsmonitor is a news blog reporting about savings behavior and statistics across whole the European Union. Bas van Essen is responsible for the content. Bas is a former business reporter, who covered the Dutch startup scene, the job market and personal finance. Bas served the Dutch Financial Times ('Financieele Dagblad'), the Dutch 'Financiële Telegraaf',, and IDG. He followed a Master Communication Science and MBA Big Data & Business Analytics at the University of Amsterdam.