Pension – what you need to know

Even if you don't really feel like it, sooner or later you'll have to deal with it anyway. Better earlier. So let's go – it's not that complicated.

Three generations of men - grandfather, father and son - on a park bench

Logically, as a young person you do not necessarily like to think about age. One's own pension still seems eternally far away. The only thing is that your later pension depends on how much you paid in as a young person. Therefore, it is actually useful to deal with it early on how the pension works.

How is the pension composed? What is the German Pension Insurance? When is the Riester pension worthwhile? We have summarized some important points.

The mandatory pension

Most people in Germany are compulsorily insured with the German pension insurance scheme. This means that every month they pay a part of their income into the pension scheme. How much pension they get later in old age is calculated from how long and how much they have paid in. The more money you pay into the pension fund when you are young, the higher your pension will be later on.

For some occupational groups, it's not the German pension insurance that's responsible, but another agency. This applies, for example, to civil servants, to doctors, and also to farmers. But the principle is the same.

Those who are not employed, but freelance, usually have to take care of themselves. He can also get insurance through the German pension insurance, but he has to apply for it. Self-employed people can find more information that is important for them here.

The German Pension Insurance

Those who are insured through the German pension insurance system automatically receive regular information on how much pension they would receive according to the current status if they retired immediately – and how much it would be if they continued to work until the statutory retirement age as they do now. So one always has an overview of how one is positioned. You can get this info from the 27. The age of retirement, respectively, if one has paid in for five years.

On the website of the German Pension Insurance you can find individual information pages for different addressees such as pupils, students, trainees, vacation jobbers or people doing voluntary work. If you have any further questions about pensions, you can contact one of the 16 regional offices of the German Pension Insurance Scheme throughout Germany to arrange a consultation.

Company pension insurance

Salaried employees can also take out pension insurance through their employer in addition to the compulsory insurance through the German pension insurance fund. The takes care of the type of facility and organizes the payment of contributions and often even finances them entirely. It is worthwhile in any case to inquire with the employer, how it is handled in the enterprise, even if one only jobs on the side or as occupation newcomer not much earns yet.

Private old-age provision

Of course, in order to have more than just the mandatory pension later on in old age, you can also look elsewhere. There are many different ways to invest your money so that it will increase.

You can take out a private pension contract. You determine individually how much you pay in monthly and when you get the saved portions then paid out.

One can invest in equity funds or buy an apartment, for example. No one can predict with certainty how much money will be paid out later, as this depends on economic developments.

You can also take out private life insurance. Money can also flow from this later in life per month. So-called unit-linked life insurance policies are one example. Here the profit is financed by the price of a stock fund. This path is particularly risky.

In any case, it is important to inform oneself well and not to sign a contract hastily that may involve great risks. The German Pension Insurance has put together its own information page on the subject of private pension provision.

The Riester pension

Although the Riester pension is a form of private provision, it is special because it is state-subsidized. So you pay a monthly contribution and receive something in addition from the state. In this way, the state wants to encourage people to take care of their private pension provision in good time.

"Riester," as this form of retirement planning is also called, pays off in the end for most people, even if they don't earn much yet. Because there is in any case for everyone, no matter how low the contributions, a so-called basic allowance of 175 euros a year from the state.

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