As of: February 14, 2024, 9:27 a.m
By: Lisa Mayerhofer
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Many people want to retire early, but it often comes with financial restrictions.
(Symbolic image) © IMAGO/Uwe Umstätter
Many people want to retire early, but it often comes with financial restrictions.
Here is an overview of the most important points you should consider.
Munich – Retiring early – that is the dream of many Germans.
But in order for this to work without financial difficulties in retirement, you have to plan well ahead.
Because those who retire earlier often have to accept reductions in their pension payments.
An overview of the most important points.
Retire earlier: These are the age limits – note the deductions
First you should clarify how long you have been paying into the pension insurance.
There is the so-called pension for “particularly long-term insured people” and the “long-term insured person” pension.
The “particularly long-term insured people” include people who have worked for 45 years and paid into the insurance.
For the other group, the limit of at least 35 years of age as a contributor applies.
For both groups, the retirement age is currently being raised in two-month increments.
Here is an overview of which birth cohort reaches the entry age and when:
Year of birth |
Age limit for particularly long-term insured people (45 years) |
Age limit for long-term insured persons (35 years) |
1957 |
63 + 10 months |
65 + 10 months |
1958 |
64 |
66 |
1959 |
64 + 2 months |
66 + 2 months |
1960 |
64 + 4 months |
66 + 4 months |
1961 |
64 + 6 months |
66 + 6 months |
1962 |
64 + 8 months |
66 + 8 months |
1963 |
64 + 10 months |
66 + 10 months |
From 1964 |
65 |
67 |
For everyone born in 1964 and above, the entry age is 65 or 67 years.
The age limits shown in the table refer to retirement without deductions.
This means that you receive the full pension payment that you have earned through the pension points you have accumulated during your working life.
If you don't have enough years of insurance and still want to retire early (possible from the age of 63), you have to accept financial losses on your pension.
For every month you retire earlier, 0.3 percent is deducted from your original pension payment - for life.
If you have been insured for a particularly long time, it is not possible to receive your pension before the age of 63 - even if you are prepared to accept reductions.
How much should you actually save for old age?
This means that if you want to retire early, you need a large financial cushion, even if you have worked for many years and have average earnings, and should not rely on a generous pension.
In general, it is advisable to seek advice from the pension fund and calculate how much money you can expect to receive in old age in your individual case.
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But how much should you actually save for old age?
The widely accepted rule is that you should set aside 10 to 15 percent of your income each month for retirement.
So if you worked for 40 years and earned 50,000 euros a year, you should have built up a cushion of at least 200,000 euros over the years, and in the best case even 300,000 euros.
This would at least be the optimal situation.
Life expectancy plays a decisive role in how far the money saved lasts.
This aspect should always be taken into account in the calculations: men have an average life expectancy of almost 78.3 years, while women live on average until the age of 83.2 years.
This can serve as a guideline to estimate how long the savings will last.
Anyone who retires at the age of 60 with a capital of 200,000 euros will have around 10,000 euros available annually for the next 20 years - that is significantly less than one might assume at first glance.
Estimate life expectancy and cost of living
Three points are crucial for determining when to leave working life behind: the projected life expectancy, the expected monthly or annual living costs and the start of retirement.
Since these aspects depend heavily on the individual situation, we can only make exemplary calculations here.
Personal circumstances, such as additional sources of income or a potential need for care, also play a role.
The need for care is a key factor in the risk of poverty for many older people, so this should be taken into consideration.
When it comes to living expenses, you should ideally have saved twice what you need.
This is particularly true if you do not have additional income to fall back on.
However, it should be borne in mind that the cost of living for most retirees is lower than for working people.
Retire earlier: partial retirement option
If you can't save enough money, working part-time could be an option.
Contributions to pension insurance will then continue to be made - even if the pension is lower than expected.
From the age of 55, employees also have the option of taking advantage of so-called partial retirement.
This represents an agreement between employee and employer and enables a gradual transition to retirement.
However, it is important to note that partial retirement is not a legal right and can therefore be rejected by the employer.
There are two different models within partial retirement: the equal distribution model and the block model.
In the equal distribution model, the previous working hours are immediately halved, which also results in a halving of the salary.
However, this will be increased by at least 20 percent.
The top-up amount can even be higher and is also tax and duty-free.
The employer is obliged to continue to pay at least 80 percent of the pension insurance contributions in order to ensure that the employee hardly suffers any financial losses when he or she retires.
In the block model, however, the remaining time until retirement is divided into two phases of equal length.
During the first phase the employee continues to work as usual, but in the second phase he no longer works at all.
The salary is halved throughout the entire period, i.e. in both phases.
In this model, too, the employer is obliged to pay a top-up amount of at least 20 percent of the reduced salary.
Continue paying in with a mini-job
There is also the option of taking on a mini-job in order to earn up to 5,238 euros a month tax- and social security-free.
However, you should not forgo the insurance requirement and continue to pay into the pension fund in order to continue collecting years of contributions and increase the pension (even if only minimally).