Retirement in Germany: Nine myths that everyone should know

Created: 08/23/2022, 1:35 p.m

By: Caroline Schäfer

Persistent myths and misconceptions surround pensions.

We provide an overview of what you absolutely need to know about retirement provision.

Frankfurt – Hardly any other topic is as complex and much discussed as pensions in Germany.

Many associate retirement with poverty in old age.

According to the Federal Ministry of Social Affairs, every fifth person drawing a pension has less than 500 euros a month at their disposal.

In view of the corona pandemic, rising costs for consumers and horrendous rental prices, the burden on the wallet is enormous, reports fr.de.

But getting an overview of the pension system is not that easy.

There are numerous misconceptions surrounding old-age provision in the Federal Republic.

An overview of the myths pensioners should know about.

1. Retirement provision in Germany: does the pension come automatically?

A widespread assumption is that the pension is automatically paid into the account every month when you retire.

However, that is not true.

Some misconceptions and myths have lingered around pensions for years.

Contrary to many assumptions, taxes must also be paid for the pension.

(symbol photo) © Frank Hoemann/Sven Simon/Imago Images

All pensions from the statutory pension insurance must be applied for in writing.

The German pension insurance recommends submitting the pension application about three months before the intended start.

2. Retirement in Germany: Does the pension have to be taxed?

You should also pay attention to the taxation of the pension.

The view that pensions are tax-free is widespread, but wrong.

Pensions are generally subject to income tax or wage tax.

However, the money is not fully taxed.

Anyone who retired before 2005 only had to pay tax on 50 percent of their gross pension.

This percentage increases every year.

From 2020, the share of the taxable pension will only increase by one percentage point per year, previously by two percentage points.

So if you retire in 2022, you have to pay tax on 82 percent of your pension.

Anyone who retires in 2040 or later must expect that the pension will be taxed in full.

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3. Does a rehabilitation stay reduce the later pension?

Many assume that a stay in a rehabilitation clinic will reduce future pensions.

On the contrary: During rehabilitation, the compulsory contributions are paid by the pension insurance at 80 percent of the previous gross salary, which increases the subsequent pension entitlement.

This was announced by the social association VdK Baden-Württemberg.

In addition, successful rehabilitation can increase the length of employment and thus achieve a higher pension.

4. Is there a pension until you have worked for at least 15 years?

You do not have to have worked for at least 15 years to receive a pension from the statutory pension insurance system.

The minimum insurance period for the standard old-age pension is five years – and has been since 1984.

5. Can you earn unlimited money in addition to your pension?

Can I continue to work as a pensioner?

Anyone claiming the pension before the statutory retirement age or receiving it due to reduced earning capacity may earn a maximum of EUR 6,300 per calendar year without the pension being reduced.

Those who earn more can lose part or all of their pension entitlement.

Once the standard retirement age has been reached, there is no longer a limit.

Speaking of which: does everyone have to work until the age of 67?

That is not completly correct.

Only from the year of birth 1964 is the standard old-age pension at 67 years.

For those born between 1947 and 1963, the standard retirement age will be gradually raised.

Anyone born before 1946 is not affected by the regulation.

Earlier entry into old-age pension is also possible, but only with deductions.

6. Can you retire at 63 after 45 years?

Anyone who has been insured for a particularly long time, for example after 45 years, can generally retire earlier.

However, since the retirement age is gradually being raised, the entry age also shifts with the year of birth, according to the German pension insurance.

Anyone born before 1953 can retire at the age of 63 after 45 years of insurance without deductions.

From the year of birth 1964, retirees can retire at the age of 65.

However, the Deutsche Rentenversicherung pointed out that the old-age pension for particularly long-term insured persons cannot be drawn early.

7. Pensions in Germany: Do only women receive the widow's pension?

The assumption that only women receive widow's pensions is also persistent - and wrong.

Because: Since 1986, both women and men have had equal rights in the pension insurance system.

Men and women are entitled to a survivor's pension if their spouse has paid contributions for at least five years.

In the so-called death quarter, i.e. in the first three months after death, there is a full survivor's pension.

After that, your own income will be taken into account.

8. Retirement provision in Germany: Are the last few years before retirement particularly important?

It is often said that the amount of the pension is mainly made up of the last years of work.

That too is a mistake.

The pension amount is calculated from the entire insurance life.

All insurance years are treated equally.

9. Retirement: what does raising children mean for old-age provision?

Those who look after the children and therefore work less or not at all are still entitled to a pension.

"For the time you are raising children, you will be placed as if you had paid contributions based on the average earnings of all insured persons," explained the German pension insurance.

If the child was born before 1992, up to two years and six months of child-rearing periods are credited per child.

If the children were born in 1992 or later, the credit is up to 3 years per child according to the pension insurance.

"Converted, one year of child-raising time brings you about 34 euros in pension per month," it said.

But be careful: You have to apply for the parental leave yourself.

Good news for pensioners: From July 2022, pensions in Germany will be increased.

The Federal Cabinet has initiated the increase.

But there is also clear criticism.

(cheese)