Pension high enough: How to calculate your earnings based on pension points

Created: 05/01/2023 16:48

By: Patricia Huber

Will my pension suffice in old age?

Future retirees can calculate this question themselves using a simple formula.

Here you can read how it works.

Berlin – Ukraine war, energy crisis, corona pandemic: A wide variety of factors fueled inflation enormously last year.

Record highs were regularly reached in 2022 – in November the inflation rate was then ten percent.

This development is causing many people great concern.

Especially with regard to pensions, the price increases could become a problem.

Anyone who is going to retire soon is now wondering whether the pension points they have collected will actually be enough.

Is the pension enough?

How to calculate your earnings

It is very easy to calculate whether the pension points collected and thus the amount of the pension will be sufficient in the future.

Employees collect the aforementioned pension points automatically during their working life by paying into the pension fund.

How many pension points you then receive per year of work depends largely on two factors: your own income and the average salary, which is recalculated every year.

In 2022, the provisional average wage was 38,901 euros.

So whoever earned that much in 2022 received exactly one pension point.

The pension amount is then calculated using the following pension formula:

Pay points x current pension value x pension type factor x access factor = monthly pension amount

Anyone who receives the classic old-age pension can ignore the last two factors in their calculations.

Pension: There is so much for one pension point

The pension value differs in an east and a west value and is adjusted regularly.

It is currently EUR 36.02 in the old federal states and EUR 35.52 in the new federal states.

From July 2023, pensioners can even look forward to a little more money.

Then the pension value is expected to increase by 3.5 percent in the west and by a good 4.2 percent in the east.

Whether the pension is sufficient in old age depends on various factors.

© IMAGO/Michael Gstettenbauer

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But how many pension points do you need?

It also depends on the lifestyle of the retiree.

If you want to keep it the way it was before retirement, you should ensure that you have around 80 percent of your last income available each month when you retire.

The following sample calculation shows how many pension points you then need:

Before she retires, Monika M. earns 4,000 euros a month, that is 48,000 euros a year.

So when she retires, she needs at least 3,200 euros to maintain her current standard of living.

With her salary, she earned around 1.23 pension points in 2022.

We assume that she paid into the pension fund for 40 years, but of course did not always earn as much as she does now.

Accordingly, we expect around 47 pension points.

Let's then take this as the pension value for the west, i.e. 36.02 euros.

Monika would therefore receive a monthly pension of EUR 1,692.94.

Pension gap: Private provision is absolutely necessary

The sample calculation shows impressively what a large pension gap there could be for many in the future.

So you should start making private provisions in addition to the statutory pension insurance as early as possible.

Be it with real estate, in equity funds or ETFs.

Private provision is imperative and should be dealt with as early as possible.