Early retirement should be well planned and calculated precisely. As tag24 writes, you have four options for taking early retirement.

But many people do not want to wait and want to retire earlier. According to surveys, 20 percent of Germans do not want to work even until their 60th year.

But is that even possible and how large are the pension deductions?

Here are four possibilities for how you can retire earlier than the normal retirement age.

Retiring at 63

The earliest possible time for early payment of the old-age pension without any deductions is upon reaching the age of 63. But there are four “catches”.

First, the so-called old-age pension for those who have been insured for a particularly long time is gradually increasing – up to the age of 65 for those born in 1964.

In simple terms: Only those born before 1953 can truly enjoy retirement at exactly 63 without any deductions. Everyone else will have to wait a few more months.

The second catch: You must have paid pension contributions for at least 45 years.

Tip: This also includes periods of raising children, military and community service or a voluntary social year, unemployment, a mini-job, and periods in which you cared for sick family members.

But even those who have not paid contributions for 45 years, but can prove at least 35 years, can become pensioners at the age of 63 – but then they must accept deductions. For every month you want to retire earlier, you must give up 0.3 percent of your pension. Calculated over a year, that is a deduction of 3.6 percent.

“Because the deductions are not taken from the pension that appears on the pension notice,” warns pension expert Jan Scharpenberg (37) from the financial guide Finanztip.de. There, the figure refers to the pension amount that would be reached in the regular old-age pension. Instead, the pension amount reached at the time of early retirement is deducted – often much less!

If you work three to four years less, of course you also pay less into pension insurance. That reduces the pension. Expert Scharpenberg says: “Since the last working years are often among those with the highest salary, this can quickly make a difference of more than one hundred euros per month.”

And one more thing: the extrapolated maximum deductions of 14.4 percent apply for the entire duration of the pension period – that is, until death. Early retirement should therefore be carefully considered and calculated.

First option: Save!

“Anyone who starts private old-age provision early has a very good chance of building enough assets for retirement with long-term investments,” says Scharpenberg.

“We recommend long-term investments in a portfolio of ETFs – so-called index funds – using a savings plan.” By long-term he means 15 years and more!

Why? “Unlike investing in individual stocks, the risk with ETFs is much more broadly spread.” In addition, long-term investing with good returns still offers the best security.

Tip: “It is best to forget about your portfolio until shortly before retirement, so that you are not tempted to use the money for anything other than a comfortable retirement.”

Attention: Check ETF returns beforehand!

Calculation example: If you want to retire with a gross pension of 1,000 euros completely without deductions two years before the standard retirement age that applies to you, you currently have to pay about 15,600 euros. Expert tip: “Check in advance whether other forms of investment such as ETFs – i.e. a very broadly diversified equity fund – do not promise higher returns.”

However, not everyone can buy pension points. Voluntary special payments are only possible from the age of 50.

Second option: make a special payment

Good news: pension deductions can be compensated for – through voluntary special payments into the pension fund.

“You are practically buying pension points and paying in advance the pension contributions that are missing due to early retirement,” explains pension expert Jan Scharpenberg.

If you want to take early retirement, you must submit an “Application for special pension information” on the website of the German pension insurance (DRV).

It then states how much the compensation payment will be. Then you can decide whether you want to make up for it in full or in part.

Third option: partial retirement

At 55, you can go into partial retirement. You buy time as an early retiree by reducing your salary.

Partial retirement is a voluntary company benefit that allows employees to retire earlier. How exactly does it work?

In the block model, the employee continues to work full-time in the first phase, but receives a reduced salary. The rest is saved for the second phase – for the exemption period.

Depending on the collective agreement, these blocks provide for a period of two to three years. Tip: just ask your employer.

Fourth option: property pension with the right of lifelong residence

When selling part of a property, you sell only your apartment or house for a fixed percentage.

This is how capital is obtained for early retirement without moving out.

However, the expert is skeptical: “In general, I would advise against that option.” The model sounds more tempting than it is.

“For example, there are property tax or maintenance costs that you have to bear yourself, even though there is a co-owner. There are also recapitalization clauses that can be very expensive.”

And what does expert Jan Scharpenberg say about his own early retirement and what are his plans?

“That is really impossible to say at my age. But I try to make provisions so that this option is always open to me. Dreams of retirement are nice, but if you want to have realistic chances of achieving them, you have to provide well for old age. Unless perhaps you improve your financial situation by winning the lottery.”

Source: fenix-magazin.de