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At 65, sooner or flexibly: the best way to retire in 2018
Wednesday, 24/01/2018 | 08:31
Those who want to retire this year are spoiled for choice: those who have not yet reached retirement age can retire at a discount. There is also a flexible checkout option in installments. FOCUS Online explains the advantages and disadvantages of different paths of a career.
There is no longer just one pension: each employee can now choose between different alternatives and decide when to start in one form or another. But different rules apply to each path. The one thing they all have in common is that they have to reach a certain age and wait for a certain amount of time.
Method One: The Natural Beginning of Retirement
Those who cannot take advantage of the special rules must work that year until they are 65 years and seven months old (born in 1953) in order to receive the full state pension. Another condition: you have paid contributions to the retirement fund for at least 60 months. The mandatory retirement age for each new year was raised for several years, until the new retirement age reached 67 years in 2031 for those born in 1964.
Table 1: Normal age limit
Contributions to the Pension Fund include:
- Mandatory contributions
- child-rearing periods
- Relative care times
- Working hours in a small job
Thus, mothers, as a rule, also receive an ordinary old-age pension, even if they take care of the family and children only after their training. Anyone who does not reach the 60-month waiting period should check whether the pension is still possible through voluntary contributions or longer child-rearing periods. Almost always worth it. Important: you must always apply for an old-age pension yourself. This also applies if you previously received a disability pension.
The second method: the probability of retirement increases without deductions
If you are making contributions to the retirement fund for 45 years, you can definitely retire early without deductions. But: the “retirement at 63” touted by politicians no longer exists. The age limits for this are also increasing year by year. For all born after 1964, entry was set at 65 years. If you were born in 1955 and wish to retire without any deductions after 35 years of contributions, you must be 63 years and at least six months old. The prerequisite is always at least 45 years of statutory pension insurance contributions.
Table 2: Raising the age limit to 65
Surf tip: Here you can read everything you need to know about retirement at 63
The third method: early retirement by deduction
Anyone who is not subject to the said special rule, who does not have 45 years of contributions, but who still wishes to advance the end of his working life, must accept deductions from his pension. The decline is 0.3 percent for each month before the applicable age limit – 3.6 percent annually. If you haven’t yet reached 35 years of the above subscriptions, but still want to stop in 2018 at 63 years and nine months, swallow the 6.6 percent discount (the difference from the legal limit of 65 years and seven months).
For the entire term of pension insurance, not only purely working years are counted. The times of pension equivalency, the division of the pension between spouses or registered life partners, small jobs, periods of consideration (eg for raising children) and other approved periods are also taken into account. These are stages of life when you cannot pay retirement contributions for personal reasons; For example due to illness, pregnancy, unemployment, school education and study.
Method 4: Flexibility in Retirement
Many people can imagine getting a pension and continuing to work. The new Flexible Pension Law, which has been in effect since July 1, 2017, offers new options for a smooth transition between working life and retirement. Do I want to get a pension, but I also want to earn money? Do I Still Need Earning Points To Increase My Pension? Or do I not want to apply for a pension at all and continue to live on my salary?
With the pension plus salary option, the retiree gets a higher income instantly. He gets his pension and benefits from the extra income. If he wanted to, he no longer pays retirement contributions. However, his pension will no longer increase as a result of additional work.
If you apply for a pension later than the legal retirement age, it will be higher. For each month they work longer, it increases by 0.5 percentage points. If you join twelve months after the usual deadline, you will receive six percent more than your old-age pension. The increase is greater because you contributed to the retirement fund for another year.
There’s more left over for extra income
The second advantage of the new law: Retirees who decide to work part-time with a pension now have few of these credits. The previous limit of €6,300 (12 months x €450 plus 2 x €450) also applies to the Flexible Pension. However, it is still possible to cut pensions by a third, a half or even two thirds if the income is higher.
The following rule has been in effect since July 2017: income above the limit of 450 euros per month or 6,300 euros per year is counted to 40 percent of the pension. Earnings in odd months are irrelevant. For example, it can be 1,500 euros twice a month, 1,000 euros three times and 300 euros once – bringing in an income of 6,300 euros in six months. Thus, the annual credit-free amount is exhausted.
Example: a 64-year-old employee receives an early retirement pension of €1,000. He receives from his previous company an additional income of 1,525 euros per month. An allowance of 525 euros is deducted from this salary. This left 1,000 euros, of which 40 percent, that is, 400 euros, is deducted from the pension. So his partial pension is 600 euros. In general, a flexible pensioner has a monthly income of 2125 euros.
Additional upper limit for partial pension
However, there is a second upper limit for additional earnings. “For this purpose, the highest value of aggregate profits over the past 15 years has been used – the so-called cap on additional profits,” explains Dennis McGee of German pension insurance.
This means: if the reduced pension and additional earnings together are above the highest income of the last fifteen years before the pension began, then this additional amount will be fully compensated for the partial pension. In the example, that was 600 euros. For this purpose, the pension insurance checks the actual earnings of flexible pensioners from the previous year once a year. If it is determined that the amount of the pension is too high, it must be compensated.
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