Many young people are afraid of poverty in old age, but there are ways to make provisions.Image: pexels / cottonbro studio
Germany
The fear of poverty in old age accompanies many young people. Long before they even get close to retirement. The sentence often comes up in conversations: “Oh, by the time we retire, we’ll drop dead anyway and we won’t get paid anything.”
It’s not that sad. At least that’s how pension experts assess the system. Sure, the age at entry probably needs to be tightened, maybe also the contributions. But in principle, pensions are paid to everyone who has paid in during their working life.
But the problem is: part-time, low-wage sector, gaps in your CV, lateral entrants. All of these are potential traps for poverty in old age. What is also part of the truth: the German pension system does not only include statutory old-age provision. After all, old age can be better secured with company and private supplementary provisions.
So what can you do today to secure yourself for your life in old age?
Buy pension months for school time
On the one hand, you can buy pension months. By voluntarily “paying” contributions from the age of 16 onwards. So basically for the time that you needed for your Abitur and your studies, unlike people who do an apprenticeship after the 10th grade. Pension advisor Anke Voss called this in one previous conversation with watson an “investment in life”. Because: In the end, it is not certain that you really need these extra months to top up your pension points.
Pension points, this is the unit of measurement used to calculate how high your pension entitlement is.
There is the option of buying additional months of retirement – for example because your school days lasted until you were 20 years old.Image: Pexels/Pixabay
However, this increase does not have to be saved from pocket money. According to the German pension insurance the deposit could be made by the 45th birthday. The costs for this bonus pension are manageable: The minimum amount is EUR 83.70 and the maximum contribution is EUR 1,311.30. These additional years could also be important when it comes to early retirement.
Private provision on the stock market
If you do not want to rely solely on the statutory pension, you should also make private provisions. You can do that with a savings stocking under your pillow – but without interest. Or on the capital market. To be more precise, with stocks, funds and ETFs.
Keeping track of things is complicated in the stock business.Image: dpa / Arne Dedert
No, there is definitely no recommendation in this article as to which shares you should buy. But here is an overview of what that actually means:
- Shares: The downside to stocks is volatility. You can win a lot – but you can also lose a lot. If you want to build your pension provision on stocks, you should really do some research and seek advice beforehand. Otherwise it can happen that your private pension provision literally fizzles out in the event of a stock market crash.
- Fund: In order to even out this volatility, it makes sense to create an entire stock portfolio. Losses can be offset by gains from other stocks. These deposits are called funds. You can choose an active fund or an index fund.
- ETFs: The so-called index funds, mostly ETFs, are often useful for long-term investments in particular. Then: The risk of a total loss decreases with the long period of time and the widely diversified portfolio. ETFs also cost less management fees than active funds.
In order to decide which investment option is the right one for you, you should read up on it and preferably seek direct advice. After all, it’s about your savings.
Private provision with state support
Another way to save for old age is Riester pensionbecause here the state subsidizes its own system. With a maximum annual basic allowance of 185 euros per person. There is also an extra child allowance. However, these maximum amounts are linked to a minimum savings. This means that you have to pay in a certain percentage of your income in order to receive the maximum subsidy.
With government-subsidized private pensions, old-age provision can be increased.Image: German Press Agency GmbH / Hauke-Christian Dittrich
The Riester pension can be used by anyone who pays into the statutory pension insurance themselves. But also people who are married to someone who pays into the pension fund. The pension will then be paid out for life from the time you retire. Whether and which Riester pension makes sense for you is best clarified with an advisor.
In addition to the Riester pension, there is also the Rürup pension. It is primarily an offer for the self-employed who do not pay into the statutory pension insurance. Because like the contributions for the statutory pension scheme, there are tax advantages here. Employees can also opt for the Rürup pension.
However, this pension is not flexible. If you cancel the contract, you will not get back the money you have already paid in. At least not until you retire.
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