Retirement Guide Tips for current and future retirees

►Step 1: Early Pension Check

When can I actually retire?

That depends on your year of birth and the number of years you’ve been insured. Since 2012, the standard retirement age has been gradually increasing. For everyone born in 1964 or later, the standard retirement age is 67. If you have at least 35 years of insurance coverage, you can retire before the standard retirement age asa “long-term insured person”—at the earliest at age 63. However, your pension will then be significantly reduced: For every month you retire before your standard retirement age, a 0.3 percent reduction applies. This reduction applies permanently, that is, for the entire duration of pension receipt.

Employees with at least 45 years of insurance coverage can retire before the standard retirement age without any reductions. Those born in 1964 or later can do so starting at age 65. Older individuals can retire a little earlier.

Our tip: The German Pension Insurance offers a retirement start date calculator online. The calculator shows when someone can start receiving their pension and how much it will be.

How much will my statutory pension be?

The pension statement, which is sent by mail once a year by the Pension Insurance Fund, provides an estimate of your pension amount. It is the most important basis for planning your retirement.

On page one of the two-page letter, the date from which you can receive the regular old-age pension without reductions is printed in bold .

Further down, your entitlement to a disability pension is listed. Specifically: whether you’ll receive a pension if, for health reasons, you can work less than three hours a day—and if so, how much that pension would be (gross).

Next is the section on the amount of your future standard old-age pension. The first amount listed here represents the pension entitlements you have accrued to date. This amount will increase further based on contributions paid in the future. This is precisely what the next figure takes into account. Here, the pension insurance fund assumes that pension contributions will continue to be paid at the same rate as in the past five years until you reach the standard retirement age.

Does the pension insurance agency have all the important data regarding my pension?

Possibly not. For employees, much of the information is automatically sent to the pension insurance agency. Nevertheless, there may be gaps in your pension account. For example, periods of continuing education or raising children. You should close such gaps in your insurance history—otherwise, your pension will be lower. Mothers and fathers should pay particular attention to periods of child-rearing . These periods must be applied for separately. They will not be included unless you submit an application.

Many IG Metall offices offer pension counseling. It’s best to schedule an appointment early on—and check whether your pension record is complete. The pension insurance website also provides a wealth of information on verifying your pension record.

How is my pension calculated?

The statutory pension is calculated using a set formula. The pension formula is :

Earnings points × Entry factor × Current pension value × Pension type factor

This results in the individual pension amount. A so-called earnings point— colloquially also called a “pension point”—is awarded to anyone who works for one year at the average earnings of all insured persons and pays pension contributions. So, someone who earns the average earnings for 45 years will have 45 earnings points when they begin receiving their pension. These points are the most important factor in the pension formula.

The entry factor determines whether pension increases or reductions apply. Reductions are applied to those who retire before reaching the standard retirement age. If neither increases nor reductions apply, the entry factor is 1.0. In that case, it has no effect on the pension amount.

The current pension value is an amount in euros. It determines how much money is paid per earnings point. Currently, the pension value is 40.79 euros.

The pension type factor determines whether the pension is an old-age pension or, for example, a disability pension. For a standard old-age pension, the entry factor is 1.0.

How much will my total retirement income be?

To calculate this, you should add up: your projected statutory pension, company pensions, and private pensions (if any), as well as any other income (such as rental income or a survivor’s pension). Be sure to note the gross and net amounts for each item! In addition to income, your expenses will also change once you retire: commuting costs and unemployment insurance contributions will no longer apply, while expenses for healthcare and leisure may increase.

What taxes and contributions are deducted from your pension?

If you have statutory health insurance, you must continue to pay health and long-term care insurance premiums even as a retiree. Unemployment and pension insurance premiums are no longer required.

Taxes are more complicated: Since 2005, pensions have been subject to increasing taxation. In return, pension contributions made during one’s working life have been tax-exempt since 2023. Tax liability depends on the year you retire. For example, those retiring in 2025 must pay taxes on 83.5 percent of their pension. Those retiring in 2058 or later must pay taxes on their entire statutory pension. Advice on pension taxation is available from local income tax assistance associations. Online calculators are available to estimate future tax and social security contributions.

►Step 2: Retirement Is Approaching

How much does early retirement cost?

More expensive than many people think. The shorter insurance period reduces the pension amount. In addition, permanent reductions apply : 0.3 percent for each month you retire before the regular retirement age. Example: Anyone born after 1964 who wants to retire at 63 instead of 67 will face a 14.4 percent reduction. Additionally, four years of contributions will be missing. These reductions can be offset in advance through voluntary additional payments into the pension fund.

Those with “particularly long” insurance records—meaning at least 45 years of insurance coverage—are in a relatively favorable position. For them, pension reductions may be waived at least in part, depending on their year of birth (“Pension at 63”).

Our tip: Pension reductions can generally be offset starting at age 50 by making lump-sum payments to the pension insurance fund. Your employer can also contribute to this.

Are there alternatives to early retirement?

If you can’t or don’t want to work full-time until retirement, you can switch to part-time work . The pay is usually still higher than the pension, and continuing to work increases your pension entitlements. Another option is partial retirement. This is regulated in IG Metall collective bargaining agreements for many employees. Older workers who are unable to work for an extended period should first claim sick pay instead of early retirement. Sick pay is usually higher than the pension, and pension reductions are avoided.

What are the benefits of working longer?

IG Metall continues to oppose raising the standard retirement age to 67 or even higher. For most workers, retiring at 67 means nothing more than a reduction in their pension—since they neither want to nor are able to stay on the job that long. Anyone who wishes to continue working must agree on the terms with their employer. In doing so, you should not accept worse working conditions: This harms you and puts pressure on younger colleagues. Continuing to work increases your future pension.

►Step 3: Your Pension Has Arrived

Submitting an Application

Pension benefits are not paid automatically. Employees must submit an application to the pension insurance agency in a timely manner (preferably three months) before reaching retirement age.

Increasing Your Pension: With Voluntary Contributions

Those who retired before reaching the regular retirement age can increase their pension through voluntary contributions. This involves paying a freely chosen amount (currently a maximum of 1,209 euros per month) into the pension fund on a monthly or annual basis until the regular retirement age is reached. From that point on, the increased pension begins to be paid.

Increasing Your Pension: Through Caregiving

Pensioners who care for a relative or acquaintance (care level 2 or higher) may also receive more money. However, this applies only if they have not yet reached the standard retirement age. Everyone else can use a workaround: For the duration of the caregiving period, they forgo a small portion of their pension (at least 0.01 percent), meaning they receive a partial pension. This way, they, too, receive a pension supplement for the caregiving work they’ve performed. After the caregiving period ends, they can switch back to a full pension.

What happens if I move abroad?

Pensions are generally paid abroad as well. However, there may be restrictions in individual cases. Anyone who wants to spend their retirement abroad should contact the pension insurance agency early on, seek advice, and, for example, provide their new address or foreign bank account information.

What happens to my pension if I die?

The pension is paid through the end of the month of death. After that, the entitlement to the pension expires. Spouses or registered domestic partners are generally entitled to a widow’s or widower’s pension. For the first three months following the partner’s death, the deceased’s full statutory pension continues to be paid. After that, either the small or the large widow’s or widower’s pension is paid. The former is paid to beneficiaries who are younger than 47 and are neither partially disabled nor raising a child. The latter is paid if the surviving spouse is 47 or older, is partially disabled, or is raising a child under the age of 18.

►Step 4: If Your Pension Isn’t Enough

Those paid under IG Metall collective bargaining agreements can generally expect a sufficient pension. However, many retirees—especially women—barely get by on their retirement income.

How to supplement your pension:

Housing Assistance

This is a subsidy for rent or the costs of maintaining your own home: Applying for housing allowance can be worthwhile for retirees with relatively small pensions. Eligibility depends not only on the amount of your pension but also on your place of residence, household size, and household income.

Our tip: Calculating housing allowance is complicated. Housing allowance calculators can help. A simple nationwide calculator is available here.

Basic Income Support for the Elderly

As a simple rule of thumb: Anyone currently earning less than 1,062 euros per month should check with the relevant social services office to see if they are eligible for basic income support. Information on this topic is available from the German Pension Insurance.

Discounts

Insurance, museum tickets, or rail passes: There are numerous special rates and discounts available for seniors. It’s worth checking them out.

Note: This article was first published on April 24, 2019. We have revised it and updated the date.