When it comes to transitioning from working life to retirement, the options available today are very different than they used to be. On the one hand, “retirement at 63” allows some people to retire earlier without deductions. On the other hand, politicians have noticed that we really don’t want to do without many of the experienced employees. Therefore, since this year there has also been the option of taking early retirement or continuing to work and earning your full salary without reducing your pension. The previous additional income limit no longer applies.
The financial experts at Stiftung Warentest took a closer look at the double income model. The following question is particularly interesting: Is it lucrative in the long term to retire earlier with deductions and at the same time continue to work? The answer varies greatly from person to person because taxes and social security also play a role in addition to income and pension entitlements. However, the sample calculations from “Finanztest” show that it can be worthwhile.
The model case of a high earner with gross monthly earnings of 5392 euros was calculated. She meets the requirements for long-term insured persons, which is why she can apply for early retirement with deductions at the age of 63 – in her case, this means lifelong pension deductions of 12 percent. If she does this and continues to work at the same time, she initially has two incomes (salary plus pension), but later only has the lower pension.
Would she fare better in the long term if she worked until the regular retirement age and only then applied for a pension without deductions? If you add up the total income for both scenarios over the years, it becomes clear that she would have to get very old for that. Only at the age of 90 would the higher regular pension have made up for what she received in early retirement in the first few years.
The double income model is even more lucrative for the second example from “Finanztest”: a normal earner (3595 euros gross) who, thanks to a particularly large number of insurance years (at least 45), can retire without deductions at the age of 64. If he continues to work until his statutory retirement age, he will not only receive the full income booster in these two years. After that, his disposable income from early retirement is even a few euros higher than the standard old-age pension would have been: because he has accumulated further pension entitlements and, as an early retiree, also benefits from a slightly higher pension allowance than with the standard old-age pension. For this reason, “Finanztest” recommends that employees who are entitled to early retirement without deductions always apply for this, even if they want to continue working until the regular retirement age.
The income booster early retirement can also be a way to smooth the transition into retirement if you only want to work part-time and want to compensate for the lower salary. Since the calculation is very different from person to person, the financial testers recommend that you go to the statutory pension insurance company for advice on old-age provision in your early 50s in order to get an idea of the financial options.
You can find more information and the detailed invoices from “Finanztest” for a fee at www.test.de
