Work until 67?
For anyone born after 1964, this is the prospect.
But many have firmly resolved to leave working life behind them sooner.
After all, the statutory pension insurance offers the possibility to retire earlier, with a discount, but for many employees with higher incomes this seems affordable.
But in many cases this appearance is deceptive.
One major reason is that employees often make a critical miscalculation when trying to gauge whether they can financially bear the haircuts.
Correctly calculated, in the end there is usually much less than hoped for, often too little.
But at the same time there are ways to compensate for this, and the earlier, the better.
When it comes to what is available in old age, most of them take the annual letters of the German Pension Insurance (DRV) as a basis.
In the pension information, this sets out what each individual can expect when they reach the standard retirement age.
Example without a pension increase
An employee, for example, who was born in 1970 and now earns 5068.88 euros a month - that is exactly 50 percent above the average - can retire in 2037 and then, if he remains at this income level until then, with a monthly statutory pension of 2051.40 euros.
Future pension increases are not taken into account.
That seems quite passable.
But what will he get if he wants to retire earlier, for example at 63?
Many people know that discounts are then due, namely 0.3 percent per month, or 14.4 percent over four years.
2051.40 euros minus 14.4 percent results in 1756 euros.
That seems manageable.
But is that correct?
Mathematically yes, but not in terms of content.
Because the pension of 2051.40 euros is only achieved if the employee works until 67.
If he retires at 63, he works four years less and no longer pays into the pension fund for four years.
His pension entitlement is therefore correspondingly lower.
And the crucial point, which many do not consider: The 14.4 percent must then be deducted from this lower value.
Source: WORLD infographic
The reason for this is that the deductions only compensate for earlier retirement.
After all, those who retire four years earlier will receive a statistical average of four years longer.
However, so that he does not get more than others who work up to 67, the sum is stretched by paying less per month, 14.4 percent less for four years.
However, the deductions do not offset the unpaid contributions, i.e. the money that was not paid between 63 and 67.
To make it even more specific, you can imagine a pot into which you as an employee pay.
What is included in this is paid out over 21 years in the retirement phase - this is the average pension period.
Those who only work up to 63 have paid less, so there is less to distribute.
And since he will receive a pension not only for 21, but for four years longer, i.e. for 25 years, this lower sum must also be spread over a longer period.
The financial mathematician Werner Siepe has calculated for WELT what that means in concrete terms.
In 2033, i.e. at the age of 63, the said employee will only have a pension entitlement of 1846.26 euros.
If 14.4 percent are now deducted, there are only 1580.40 euros left.
And what many also forget: The health insurance contributions still have to be paid, those with statutory health insurance are deducted an average of 7.95 percent, and 3.05 percent for long-term care insurance.
So in the end only 1406.56 euros remain.
Example with a pension increase of two percent per year
But even that is not the whole truth.
All of these calculations are based on the assumption that there will be no more pension increases until 2033 or 2037.
However, that can be ruled out.
In its pension insurance report, the federal government itself expects a future pension increase of two percent per year in a forecast.
Werner Siepe has therefore also calculated what this would mean for the said employee.
If he worked through until 67, he would receive a monthly pension of 2872.46 euros with the aforementioned annual increases.
If, on the other hand, he retires at 63, the pension entitlement then reached would be a whopping 484.13 euros lower, at 2388.33 euros.
From this, in turn, 14.4 percent must be deducted, exactly 343.92 euros.
However, this means that the loss due to the four years without payments is now even higher than the deduction due to the earlier retirement.
Source: WORLD infographic
At the end of the day, a monthly pension of 2044.41 euros remains, and from this, in turn, health and long-term care insurance is deducted, so that ultimately only 1819.52 euros per month end up in the account.
That still seems reasonably passable today, but if pensions rise by two percent annually, prices should rise accordingly.
The amount would be worth more than 25 percent less by 2033 than it is today; today it would correspond to a monthly net income of around 1360 euros.
For someone who currently earns over 5,000 euros gross, a nightmarish idea.
So work until 67?
It doesn't have to be.
Because the good news is that both the cuts due to early retirement and the defaulted contributions can be offset.
Since 2017, employees have been able to compensate for the reductions due to early retirement from the age of 50 by making a special payment into the pension fund.
How much that is depends on how many months earlier you want to retire and how high your pension entitlement is.
Employees can have the special payment calculated individually by the pension insurance.
You can also do this online at eservice-drv.de.
In the "Submit application online" area, after entering the insurance number, the application number V0210 must be selected.
For the employee mentioned, who would like to retire at the age of 63 and would have to accept a monthly payment of 343.92 euros, for example, it would be almost 90,000 euros in special payments.
This seems like a lot, but on the one hand the sum can be spread over several years.
Source: WORLD infographic
Secondly, employees should definitely do this, because they can deduct payments for old-age provision from tax up to an amount of around 25,000 euros per year.
This also includes the regular contributions to statutory pension insurance as well as to Rürup pensions or professional pension institutions.
Thirdly, the value of the payments made increases with every increase in pension.
"The earlier the better," advises Siepe.
However, this does not compensate for the loss due to unpaid pension contributions between the ages of 63 and 67.
But here, too, there is a way out, but only later.
“Anyone who has money left can at least partially compensate for these additional pension losses if they are not compulsorily insured early retirees - that is, if they do not pay voluntary contributions between the ages of 63 and 67,” says Siepe.
This has been possible for the first time since the introduction of the flexible pension in 2017.
"But hardly anyone knows that."
Ultimately, the insured person then draws the reduced pension from 63, but at the same time continues to voluntarily pay into the pension fund - and thus increases the pension for the following year.
He can freely choose how much he would like to deposit, between the minimum amount, which will be 83.70 euros per month in 2021, and the maximum contribution of 1320.60 euros per month.
It should be noted, however, that more taxes are then to be paid for the higher pension, and it is possible that this is the only way the pensioner will exceed the threshold for tax liability.
In addition, those with statutory health insurance also have to pay higher contributions.
So everyone should work out exactly whether it's worth it.
Source: WORLD infographic
However, the special payments and voluntary contributions are particularly attractive for those with private health insurance.
As a pensioner, they receive a subsidy from the pension insurance of 7.9 percent of their retirement pension for their policy.
The higher this is, the higher the grant.
For everyone, however, the additional payments into the pension fund are only worthwhile if you can draw the pension as long as possible, i.e. live as long as possible.
But nobody can foresee that.
Luckily.