Retirement at 50: Possible, but these are the financial consequences | pension

The legal retirement age is rising. Now the age is 65 years, from 2025 it will be 66 years and from 2030 it will be 67 years. But not everyone sees that. More and more citizens are finding it important to enjoy old age early. A study conducted by human resources service provider Acerta provides evidence of this development. Of the employees who retired in 2021, 37.5 percent were under the age of 65. This is a 14 percent increase compared to 2019.

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The minimum legal early retirement age is 63 if you have worked for 42 years. In theory, you will then be two years less than the minimum age set and you will also have worked three years less than the starting point on which the government calculates your pension. Because the Federal Pension Service assumes a 45-year career.

A person with an exceptionally long career can also apply for early retirement at age 60 after 44 working years, at age 61 after 43 working years and at age 62 after 43 working years.

So the pension you receive or will receive is based on 45 years of service. This is why you lose about 1/45 of your pension for every year you stop early. For example, if you were to receive a pension of €2,000 per month after 45 years of work, it would be €1,867 per month after 42 years of employment. An amount that remains unchanged for the rest of your retirement life, without factoring in indexation.

In principle, no one is obligated to work in the labor market until the legal retirement age or the legal early retirement age. You can stop working at any time in your career. But stopping earlier than the legally established moment has consequences for pension entitlement. Moreover, you will only get this benefit if you reach a certain age and have worked for a certain number of years. This is fixed in pension systems.

The rule also applies here: early retirement means getting a lower pension. But in this case, the pension you are entitled to is less than the pension of a person who legally retires early.

For example, a person who stops working at the age of 50 and after 28 years of service will have to go through a much longer period without income, which is 15 years. Once that person reaches legal retirement age, they will also receive a lower pension: 28/45. Therefore, anyone who wants to retire sooner has to first save a large amount. Read here how to deal with that.

There is an early retirement system in our country. Early retirement means that you stop working before the legal retirement age, provided you can demonstrate sufficient years of employment. A 60-year-old can retire early after 44 years of work, and a 61-year-old after 43 years of work. Anyone over the age of 63 can apply for early retirement after 42 years of employment.

So the same person who stops working at the age of 50 can’t have fun either early retirement terms† That is why he only received a pension for the first time after fifteen years, i.e. at the age of 65.

We should also not lose sight of the fact that the same person will have to wait until their 65th birthday to get Supplementary pension To be able to process. You will receive this amount from your employer once you retire according to the retirement rules. It is not possible to request it earlier.

It’s also important to know the following: If you stop working, no more payments will be made into your supplemental pension, so your 65 equity is much smaller than if you had continued working.

Those who stop working earlier than the legal deadline also pay more in taxes. If you work until your 65th birthday, you pay taxes as an employee on 80 percent of your supplemental pension contract capital. If you retire early, you have to pay taxes on 100% of the principal.

There are other options for those who have to stop working due to illness. Your doctor can inform your health insurance fund inability to work† The Health Insurance Fund can then check if you are eligible for sickness benefit. Once you reach the retirement age of 65, these benefits will disappear because you will then receive your pension.

Read also: How much does carefree aging cost? You should save that amount together

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