Setting up a pension plan at age 25 means you only have to put 20 percent of the amount aside every month compared to a person who starts a plan at age 45. This is due to the compound interest.
Do not procrastinate. Time is money. People tend to overlook how important their third and final big stage in life is.
Retirement plans in Germany
The German retirement system is based on three pillars. These consist of the mandatory state pension, occupational (or company) pensions, and tax-deductible private pensions. The latter are in most of our clients´ cases the superior option.
Mandatory state pension
The public pension (Deutsche Rentenversicherung) is obligatory for all employees – not for self-employed persons. The pension payout is based on the employees salary contributions alongside government subsidies. The money is then redistributed among the existing old age people. In other words, the current working population is paying for the current pensioners. It is not investment based. It follows the generations principle.
Private pension and tax-deductible Basisrente
These are the recommended retirement plans for the majority of our clients. The big advantages are the tax incentives of both products. Both have different degrees of taxation and flexibilities attached. The detailed differences we can explain to you in a one hour phone and online session. Please feel free to make an enquiry below.
These are offered by companies to their employees. The system is designed to function as an add-on to the state pension – and help employees improve their retirement situations. Due to lower returns of investment however (with the classical “Direktversicherung” pension schemes for example) it is in most cases recommended to set up a private retirement plan first plus a Basisrente – and only use a company scheme as an add-on.
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Derrick Loehr has been in the investment and insurance business for over 15 years and can easily help you set up the best solution according to your requirements.