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Get out of your job: This is how high your salary is if you take part in early retirement
Early retirement through partial retirement
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Partial retirement is a good way to retire earlier. With this structure, employees get more money than part-time employees. The financial tester’s calculator shows how high the salary is.
Partial retirement is a great invention: Employees slide out of their professional life into retirement – and mostly earlier than the statutory retirement age. It is made possible by the block model: employees agree with the company on four years in which they work full in the first two years and then not at all in the last two years, and receive a part-time salary that is the same in both blocks is. More individual solutions are also possible. In collective agreements and works agreements, there are clear agreements on how partial retirement can be implemented. Otherwise, the HR department or the works council can help with the transition into retirement. However, according to the experts from “Finanztest”, there is no entitlement to partial retirement.
The top-up amount
The big advantage of partial retirement: the working hours are halved, but not the salary. Because you only get 50 percent of your last wage, but the employer increases this amount by 20 percent – and that is tax-free and non-contributory, she explains German pension insurance. However, the top-up amount has a different effect: the so-called “progression reservation” means that it is not taxed itself, but increases the tax rate for income. Since the tax office only ends up paying taxes on wages, taxes for the top-up are due at the end of the year.
Barriers to retirement provision
Legally, there are a few legal hurdles that have to be overcome for partial retirement: The employees must be at least 55 years old and have been employed subject to social security contributions in the past 1080 calendar days (i.e. three years) – this also includes sick leave, i.e. sick pay, and unemployment . In addition, the partial retirement must last until a pension can be applied for at the earliest.
It was not just the Corona period that raised the issue of short-time work and partial retirement. In industry in particular, phases of short-time work are not so rare. Employees who go into partial retirement must note that the amount of time in the short-time working phase is not used to calculate the working hours in the partial retirement phase. The situation is different if short-time work starts during partial retirement. If the employees work up to half of the agreed weekly working time, this has no effect. If you work less, you have to rework. This also applies to unpaid leave to which employees are sent by the boss: Here part-time work for older workers is interrupted and the time has to be reworked.
Partial retirement: a few examples
An example: Max Mustermann earned well and could retire in 2021, when he will be 63 years old. If he had worked part-time for three years, he would now receive a gross pension of 1,667 euros per month. Without the partial retirement, this amount would be 1,677 euros. The financial gain would therefore only be minimal.
Another example: Hans Müller lives in North Rhine-Westphalia, pays church tax, is legally insured, has two children, but no allowances and earns around 2800 euros a month. Now he wants to retire this year, he is in partial retirement. The experts from Finanztest do the math: After deducting all taxes and social security contributions, a net of 1081 euros per month remains. But there is also an increase by the employer. This adds up to a monthly net wage of EUR 1,361.10. The monthly wages before partial retirement were around 1880 euros.
A childless single, employed by statutory insurance and not in the church from Baden-Württemberg earns well, he receives 5500 euros gross per month. His part-time wage (50 percent) in 2021 would be 2750 euros gross before all deductions. If these taxes are factored out, 1861 euros remain, plus the top-up amount of 20 percent, i.e. 550 euros. The employee receives 2411 euros net per month. The wages before partial retirement were around 3310 euros per month.
If you want to calculate a possible partial retirement yourself, you can do this “Finanztest” calculator to use.
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