background
After a long working life, many employees want to retire as early as possible. When can you start receiving the statutory pension? And who can actually afford early retirement?
Early retirement continues to be a goal for many employees. Despite the discussion about extending working lives, they want to apply for the statutory pension as early as possible.
In recent years, around half of employees in Germany have applied for a statutory pension before their actual retirement age. This emerges from data from the German Pension Insurance (DRV).
Retirement at around 64 years of age
The actual retirement age was recently on average around 64 years – and therefore around two years below the current standard age limit from which future retirees can actually apply for their statutory pension. From those born in 1964, the standard retirement age increases to 67 years.
A large proportion of pension applications before this standard age limit go to those employed who have completed 45 or more years of insurance in the statutory pension insurance. They are considered “particularly long-term insured people” and enjoy special privileges, as Henrik Arning from the VZ Vermögenszentrum explains: “If you have managed to achieve 45 eligible years of insurance, then you can draw your pension at 65 without any deductions, provided you were born after 1963. If you were born before 1963, you can draw your pension even earlier without any deductions.
Also Child-rearing times count with
In addition to periods of employment with payment of contributions, the 45 years of contributions also include periods of raising children and, under certain circumstances, even periods in which the insured person received unemployment benefit I. Voluntary pension contribution payments are also taken into account – provided that compulsory contributions have been paid for at least 18 years.
The “pension at 63” was once introduced for the group of people who have been insured for a particularly long time. It should enable people with very long working lives to retire earlier. This is still possible today, but the minimum age for this early retirement – just like for the “normal” pension – has been gradually raised. The pension at 63 has now basically become the pension at 65. However, these early retirees can still move into retirement without sacrificing the amount of their pension.
Many skilled workers among the early retirees
According to expert Ruth Student from the German Economic Institute (IW), these early retirees include more men than women, including many skilled workers and relatively more East Germans in the baby boomer generation. And there are more overall. “Approximately a quarter of new pensioners retire without deductions after 45 years of insurance. If a large number of ‘boomers’ are actually these ‘standard pensioners’, i.e. skilled workers, then we have to assume that the proportion of this group will increase again,” says Pupils.
In addition to the pensioners with 45 years of insurance, there is a second group of retirees: the “long-term insured” have 35 years of insurance. If you were born in 1964, you have to wait until you are 67 years old before you can apply for a full statutory pension. But if you have 35 years of insurance, you can retire at the age of 63.
Discounts for “long-term insured people”
However, this has its price, because then there is a risk of a deduction of 0.3 percent per month of early retirement, as pension expert Henrik Arning calculates: “Mr. Müller, for example, who expects a pension of 1,500 euros and decides for himself, I want pension three If you start years earlier, you then have to accept a discount of 0.3 percent times 36 months. So the discount is 10.8 percent.” He therefore only receives 1,338 euros per month. “This is about the lifelong pension, so this deduction remains for life.”
Because more and more employees are pushing to retire as early as possible, pension funds are becoming increasingly strained. The early pension without deductions after 45 years of contributions alone costs billions every month, according to IW expert Student: “In fact, a good three billion euros are paid out every month to pensioners who have retired using this form alone .”
Early retirement soon no longer possible?
It is therefore quite possible that the legislature will soon have to make significant changes to the existing pension system: for example by increasing pension contributions, by lowering the pension level – or by further increasing the retirement age. Retiring earlier will no longer be possible for many employees. Or they have to accept even higher discounts.
In order to compensate for these deductions, future retirees have several options: This includes the option of making additional voluntary payments to the pension fund in order to top up the pension account. This is possible upon application to the German pension insurance. The abolition of additional income limits for pensioners since 2003 has also made it easier to earn additional income while receiving a pension.
Private provision as a supplementary pension
And last but not least, private provision to compensate for low statutory pensions is likely to play an increasingly important role in the future. Retirement consultant Arning recommends additional security for old age on the capital market.
“For example, regular savings contributions to the stock market can help, perhaps widely diversified through index funds or ETFs. A globally diversified ETF portfolio can be worthwhile if you stick with it early and regularly,” says the expert. “In this way, you can build up another part of your retirement provision at the same time.”