What to do to retire
Early retirement: what options do workers have?
Associated with the desire to end one's professional career early is the fear of a reduction in pension. However, there are definitely ways to take early retirement without any deductions.
When is early retirement possible?
All those who were born in 1964 or afterwards can, in principle, from the age of 65 the so-called Old-age pension without deductions relate, so go into early retirement. The prerequisite for this, however, is that you have been insured for 45 years. Then one counts as a "particularly long-term insured person". For those born between 1964 and 1952, the entry age for the old-age pension is staggered on a monthly basis. For example, anyone born in 1960 can draw an old-age pension from the age of 64 and 4 months as a “long-term insured person”. Those born before 1953 have the option of drawing their full old-age pension at the age of 63.
A "long-term insured person" has 35 years of insurance and can retire from 63, but must accept discounts. For each month up to the regular entry age, 0.3 percent of the pension is deducted. It is important to know that the pension remains permanently reduced and does not increase again after the regular retirement age. So this step should be carefully considered.
For some groups of people, separate rules apply to old-age pensions. These include the severely disabled, the unemployed and certain professional groups (e.g. pilots and mining workers).
Compensate for discounts in good time
If you consider in good time that you would like to claim the old-age pension after 35 years of insurance, you have the option of making up for the expected advance payments. From the age of 50, insured persons can request information from the Deutsche Rentenversicherung by how much they would have to increase their contributions to the pension insurance in order to offset the deductions. Early retirement is then possible on the same terms as when reaching the regular entry age.
Smooth transition into retirement
There are other models as well, such as workers with lower financial losses already a few years earlier early retirement or be able to make the transition to retirement flow smoothly.
Whether partial retirement is possible, and if so, under what conditions, depends on the employer. In principle, there is the option of halving working hours. Two requirements must be met for this:
- Minimum age 55 years
- The retirement age is at least 3 years in the future
During the partial retirement, employees only work 50 percent of the time and receive a correspondingly reduced salary. In addition, however, the employer increases the salary by 20 percent. The increased income is even tax-free, but must be stated in the tax return and may lead to additional payments.
Depending on the company, the employee can also choose a block model. The period of partial retirement is halved: If it lasts four years, for example, the employee will work full-time for another two years and not at all in the last two years. The salary is paid reduced during the entire period. All insurance premiums also continue to run normally.
Lifetime working time account
Anyone who would like to take time off for the same wage some time before regular retirement can do so with a lifetime working time account. This is set up by the employer and the employee can accumulate credit on it - for example through bonus payments, Christmas bonuses, overtime or unused vacation days. The employer can then continue to pay the salary from this credit during the early leave of absence. If the employee ultimately does not use the option to leave the company or changes employer, he or she can have the credit paid out.
Earn extra while you retire
For some employees, it is also an option to take early retirement after 35 years of insurance, despite the deductions, and to earn some extra work through part-time jobs. However, it should be noted that an annual income limit must be adhered to. If the additional income is too high, the pension insurance will reduce the statutory pension accordingly. These losses only exist up to the actual age limit at which regular retirement would have taken place. After that, pensioners can earn an unlimited amount of money.
Is early retirement an option for me?
At around 50 years of age, workers should consider whether or not to take early retirement. Then there is still enough time to, for example, offset discounts or set up a lifetime working time account. For some people, premature retirement after deductions is enough to survive. In order to be able to assess your individual situation, you should get an overview of the expected costs. For example, do you own a home or do you have to pay rent? Are you single or do you live in a partnership? Do you want to travel a lot in retirement or, above all, spend time in your own garden? All of this affects how much money you need and whether you get more advantages or more disadvantages from early retirement.
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