Early retirement for expats in Germany is only for the wealthy

Published:  8 Aug at 6 PM
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Early retirement in Germany for citizens and long-stay expats is becoming more popular, but it’s only for the rich.

For older expat professionals in Germany and workers in general, retiring early is a far-fetched dream only made possible by paying additional contributions to the state scheme. Those taking it up are increasing in number year on year, but it’s an expensive issue that’s almost unavailable to those on less than high salaries. According to the German government’s ministry for statutory pensions, voluntary pension contributions in 2018 soared to 207 million euros, eight time more than the amount received in 2015.

For long-stay expats planning to retire before the statutory age of 65 years and seven months, the only way is to pay what’s known as the ‘age factor’ penalty. For every month of early retirement, a percentage is deducted from the pension entitlement, adding up to a loss of 3.6 per cent per year once early retirement is taken. For example, for those expecting a pension of 2,400 euros a month and planning for a retirement date two years earlier than the entitlement date, 172 euros every month will be lost. It’s possible to make extra payments which cover the two final years’ missed payments, with options of either instalment plan or a lump sum payment accepted, but calculations show this option is only possible for high-salaried workers.

For workers expecting the previously mentioned 2,400 euros per month, retiring two years earlier would necessitate a payment of some 40,000 euros, and those wishing to retire four years early would need to part with over 88,000 euros. For long-stay British expats working for Germany-based companies and now applying for citizenship or permanent residency due to Brexit, it’s just another bureaucratic nightmare they didn’t expect.
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