Status: 05.12.2023, 16:00 PM
By: Victoria Krumbeck
The beginning of retirement should be well considered. Those who want to retire in 2024 could already benefit from up to 2023 euros with early retirement in December 2000.
Berlin/Munich – Many people dream of early retirement at the age of 63. However, employed persons born in 1964 or later can only retire without deductions at the age of 67. If you want to apply for a pension earlier, you often have to expect high deductions. As a result, retirement at 63 seems unattractive to many people. But according to the Federal Association of Pension Consultants, early retirement can be worthwhile under certain circumstances.
Early retirement: Combined pension application in 2023 can be worthwhile
As a rule, the pension deduction is 0.3 percentage points for each month that a working person retired earlier. So if you want to retire at the age of 63 instead of 67 and were born after 1964, you have to expect a monthly deduction of 14.4 percent. According to the Federal Association of Pension Consultants, the survivor's pension would also be correspondingly lower. In general, the older you get, the less worthwhile it is to retire early, as the association informs. However, when working people can retire also depends on a variety of other factors.
Retirement earlier could be worthwhile for some working professionals in December 2023. © Rainer Berg/IMAGO
The rules surrounding pensions are complicated. However, if you are thinking about retiring in the coming months and years – and want to continue working – you could even start with a plus. "At the turn of the year, this connection will be suspended once. Anyone who plans to start retirement in January 2024 and could draw a pension for the first time as early as December 0 with an additional 3.2023 percent deduction should do so in the vast majority of cases with a combined pension application," says Thomas Neumann, President of the Federal Association of Pension Consultants. Particularly important is the elimination of the additional earnings limit for pensioners since January 2023.
Aftermath of the Corona pandemic: Benefiting from early retirement in 2023
In concrete terms, this means for pension applicants that the application for long-term insured persons should be applied for on December 1, 2023 with a 10 percent partial pension in combination with a 100 percent full pension on January 1, 2024, according to the association. The reason for this advantage is the effects of the Corona pandemic and a special rule, writes Wirtschaftswoche. Contributors receive one pension point per year, which depends on the amount of their own income in relation to the general average salary.
If one's own contributory income is exactly the same as the average salary, one pension point is calculated. The further the income is above the average, the more points you get. However, the points are limited to the contribution dimension limit of 7300 euros per month. In the east, the limit is 7100 euros per month.
In the case of the special calculation rule, the final average salary is not used for the calculation of points for the calendar year of the start of the pension as well as for the previous year, but the provisional average salary. On the basis of the wage increase from previous years, the provisional average salary is calculated. The reason for this is the early, reliable determination of the pension. As a rule, the discrepancies between the provisional and final average pay are small. But for 2022, the pandemic has affected the difference.
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Pension in December 2023: Up to 2000 euros advantage at the start of retirement
'The final determination of the average salary is normally higher than the provisional average wage. However, the difference is particularly high in 2022," says the German Pension Insurance Association (DRV Bund) in response to an inquiry from Wirtschaftswoche. The wage increases in 2020 and 2021 were very small. Although this changed in the following year, the calculation was based on the low wage increase of the pandemic years. Thus, the amount of the provisional average salary in 2022 is 38,901 euros. The final average salary was 42,053 euros.
This means that those who retire in 2023 will be charged more pension points because the provisional average salary is lower. A retirement start in 2024 would also mean a higher provisional average salary and thus fewer pension points, as average salaries would converge again. "If you take all the relevant calculation aspects together, the advantage of starting retirement in December adds up to about 1000 euros for average earners and 2000 euros for higher earners," explains Neumann.
Pension 2023: Lower average salary and more pension points
If the pension is applied for in 2024, an average earner will receive about 30 euros less pension per year, while the maximum contributor will initially receive around 60 euros less pension. The Federal Association of Pension Consultants emphasizes that the combined pension application with 10 percent partial pension as of December 2023 and 100 percent full pension as of January 2024 is always financially superior to the normal retirement start with 100 percent pension on January 1, 2024, no matter how old you get.
The application could also be worthwhile for contributors who do not want to retire for another one to three years. "Even if the pension is to start between February 2024 and April 2027, the strategy comes into question," pension consultant Andreas Irion, vice president of the Federal Association of Pension Consultants, told Wirtschaftswoche. Although there will be a temporary disadvantage in the period leading up to the regular start of retirement, this will be "in total over the months always smaller than the advantage of the additional pension payment in the event of a combined pension application in December 2023," the pension consultant explained.
Until February 29, 2024, a combined pension application can still be submitted with effect from December 1, 2023, according to Irion. Before working people decide to retire earlier, they should consider the amount of the deduction and how much they will work in retirement. (UK)