There are many reasons for the desire for early retirement. Most people are merely looking forward to being a retiree. They assume that their lives will develop positively in this new phase. More time for the family, for friends, for hobbies, and for traveling. Finally you will have enough peace and relaxation.
The Standard Retirement Pension
Most governments has determined the age at which we can regularly retire and receive our full retirement pension. However, since the so-called regular age limit depends on the year in which you were born, this differs from person to person.
For example, if you were born in 1954, you will receive your standard retirement pension at age 65 and eight months. With each year that you were born later, the regular retirement age increases by one or even two months. This regulation ends (for the time being) with the year of birth 1964: those who were born in this year or later can currently retire at the age of 67.
Opportunities For Longtime Insured
People with particularly long working lives can retire before the standard retirement age. Depending on how long they have paid into the pension insurance, this is possible with or without discounts.
Long-term insured persons are those who have paid into statutory pension insurance for at least 35 years. You can retire at 63, but then have to expect deductions on their pension payments. Per month, which they retire before their regular retirement age, 0.3 percent of the pension payments will be retained.
Someone who was born in 1954 can regularly retire at the age of 65 and eight months. If he goes at 65, he misses 2.4 percent of his pension monthly. The reduction applies over the entire duration of the pension.
Disadvantages Of Early Retirement
We have already explained: If you retire long-term insured earlier, you will have to expect cuts in your pension payments. But that is not the only disadvantage of early retirement.
For both longtime and notably longtime insured, the earlier you retire, the less you pay into the pension fund. For example, if someone with average earnings stopped working two years earlier, he also collects two pay points less than possible. His pension payments are correspondingly lower.
Off To Early Retirement
Early retirement sounds tempting? Then it is advisable to deal with this topic at an early stage. Because good preparation pays off so that you do not get into financial trouble later on. Experts recommend an inventory around the age of 50. At this point, you can foresee well what options are suitable for you. That’s what you should do:
Forecast: Planning Finances
First, you should consider what you will need for money as you age. Do you live for rent, or do you have your property that has been paid off by then? Do you live alone, or is there a partner who can secure you? Are you in debt, do you have to support family members financially, or are you investing more?
You should realistically calculate how much money you need monthly when you retire. Always include a small buffer so as not to be surprised by the unforeseen. Can you afford early retirement?
Consider Alternatives: Opportunities Beyond Early Retirement
If early retirement is not possible for you due to excessive financial losses, there are other ways to retire early from work. The following two models provide an individual solution with your employer.
Partial Retirement
For partial retirement, you will officially retire as soon as you reach your regular retirement age. Nevertheless, you already stop working before that. If you are 55 years or older, you can take advantage of this opportunity.
Lifetime Work Account
A second possibility to stop working is a so-called life working time account. This will set up your employer for you. For example, if you work overtime or leave days, you will be credited with time on that account. Also, salary components such as Christmas bonuses or premiums can be credited here.
Every day that you save on the life work account (also known as the time value account), you can use it to leave the job rather.
However, as with partial retirement, you will still be in your employment relationship and will continue to be paid by your employer in the gained free time. So you are still covered by social insurance.
Frequently Asked Questions About Early Retirement
What Are The Times Recognized As Insurance Periods?
First, these are the times when you pay contributions into the pension insurance. So if you work – both as a trainee, employee or self-employed.
There are also times when you are required to do federal voluntary work, receive unemployment benefits, raise your children, or look after relatives. The latter, however, is not automatically detected.
On the other hand, there are also non-contributory periods for the pension. These include periods in which you are in a rehab program or maternity protection periods.
What Are Compensation Payments
Under certain conditions, you can voluntarily make special payments to pension insurance. This has advantages if you want to balance discounts due to early retirement but also if you’re going to increase your expected pension payments.
Your advantage: If you make compensation payments from your resources, you can claim these as special expenses for the tax.
Can I Earn Additional Early Retirement
Many find it difficult to stop working overnight. Often there is a side or mini job located.
As a pre-retiree, you can earn up to 6,300 dollars per year without affecting your retirement pension.
If you work until the normal retirement age and only then retire, you can even earn unlimited after that. Your income does not affect the amount of your pension.
When Can Severely Handicapped People Retire?
Disabled people can apply for their pension earlier than people without disabilities. Again, different age limits apply depending on the year of birth.
While the birth year of 1955 can already retire at the age of 63 and nine months, the age of 65 is valid for the 1965 year. To retire earlier, severely disabled persons must have paid into the pension insurance for at least 35 years.
All people with a degree of disability of at least 50 percent are regarded as severely disabled.
