Retirement at age 63 increases earnings by a factor of two

In Germany, changes are afoot in the retirement landscape. Here's a breakdown of the key points surrounding early retirement, pension adjustments, and the introduction of the "active pension."

As of now, there is no longer a limit on additional earnings for early retirement. This means that individuals can choose to retire early and continue working, a decision that comes with its own set of advantages and considerations.

For instance, a high-income model retiree born in April 1962, who opts for early retirement at 63 instead of the regular retirement age of 66 years and 8 months, will have their pension reduced by 13.2%. This reduction results in a monthly pension of 2124 euros, as opposed to the 2447 euros they would receive with regular retirement.

However, this combination of early pension and continued work brings significant financial advantages. Over the four years from 2025 to 2028, the total income after taxes and contributions amounts to 237,714 euros.

It's important to note that only 40% of early retirees in 2024 had reached the statutory retirement age on their first day of retirement. For those planning to apply for a statutory pension before their regular retirement age, it's advisable to seek advice on which years will be credited and for which they will receive pension points. Berliner Zeitung is a resource for such queries.

In 2024, a total of 559,000 people retired early in Germany, an increase of 0.72% compared to 2023. Of these, approximately 60% were those who had applied for early retirement.

The "active pension" will be introduced at the beginning of next year, allowing retirees who continue to work beyond their regular retirement age to receive part of their salary tax-free, up to 2000 euros per month. This initiative is designed to incentivise continued work and boost retirement income.

It's also worth mentioning that for the birth cohort of 1964 and all those born later, the regular retirement age is 67 years. However, employees who have contributed to the statutory pension insurance for 45 years can retire before reaching the regular retirement age without accepting any deductions from their net pension.

The birth cohort of 1961 reached the minimum age of 64 years and 6 months in July 2021 and can receive the statutory pension without deductions. For the birth year of the group that can receive a full old-age pension without deductions in 2025, it's around 1960 or 1961.

In conclusion, the decision to retire early in Germany comes with its own set of implications, both in terms of pension reductions and potential financial advantages from continued work. Prospective retirees are advised to seek advice and understand the specifics of their situation before making a decision. The introduction of the active pension next year is expected to further incentivise continued work among retirees.