Achieving Early Retirement at Age 63: Is It Possible for You? - Early Retirement Possibilities: An Examination
In Germany, retiring early is a possibility, albeit with certain deductions to your pension. Here's a step-by-step guide to help you navigate the statutory pension system and the conditions for early retirement.
## Understanding Early Retirement in Germany
The first step is to understand the minimum age and contribution period for early retirement. Generally, you need to have contributed to the German pension system for a certain number of years, although more years are typically required for early retirement. The pension system considers various periods, such as employment, self-employment, voluntary contributions, child-rearing periods, and more, to calculate the 45 years of insurance needed to retire without deductions at the age of 64 years and six months (for those born in 1961).
There are two types of early retirement: at 63 and at 62. Retiring at 63 results in a pension reduction of 0.3% for each month of early retirement, with a maximum reduction of 14.4%. Retiring at 62 is possible for those with severe disabilities or specific conditions, and the pension decreases similarly.
## Steps to Retire Early
1. **Check Eligibility**: Ensure you meet the contribution years and age requirements for early retirement.
2. **Calculate Pension Deductions**: Understand how much your pension will be reduced based on your early retirement age.
3. **Apply for Early Retirement**: Submit your application to the Deutsche Rentenversicherung, providing necessary documents and information.
4. **Consider Alternative Income Sources**: If you're retiring early, you may need additional income sources to supplement your reduced pension.
## Special Considerations
1. **Expats**: If you're an expat, you should also consider international pension portability and tax implications when planning early retirement in Germany.
2. **Refund Options**: If you leave Germany after a short period, you might be eligible for a refund of your pension contributions, but this typically requires waiting 24 months after your last payment.
3. **Voluntary Contributions**: Voluntary contributions are only counted by the pension insurance if at least 18 years of compulsory contributions have been paid.
4. **Permanent Deductions**: The deduction for early retirement is 0.3% per month, amounting to a 7.2% deduction for retiring two years early and 14.4% for retiring at 63 instead of 67.
5. **Consultation**: A detailed consultation with an expert from the German Pension Insurance can be helpful.
6. **Application Timing**: The pension application must be submitted at least three months before the desired retirement date, regardless of whether it is the pension at 63 or a little later.
7. **No 'Retirement at 63' Without Deductions**: The original "retirement at 63" no longer exists in Germany without deductions.
8. **Pension Statement**: The pension statement from the pension insurance, sent out every three years starting from the age of 55, contains information about the conditions for early retirement.
Remember, the shorter the time of paying into the pension fund, the more pension is lost. The regular retirement age in Germany has increased from 65 to 67.
This guide serves as a starting point for those considering early retirement in Germany. It's essential to consult with a pension expert for a detailed understanding of your specific situation and eligibility.
- A pensioner in Germany, aiming for early retirement at 63, will face a pension reduction of 0.3% for each month of early retirement, with a maximum reduction of 14.4%.
- To supplement your reduced pension, if you're retiring early, consider exploring alternative income sources and consulting with a financial expert for personal-finance advice.
