Individuals failing to retire early at age 45 may be squandering their financial resources - If you opt to continue working past the age of 45, you elect to donate your earnings instead
In Germany, the "Old-age pension for Particularly Long-insured Persons" offers a unique opportunity for individuals who have contributed to the pension system for at least 45 years. This special statutory pension option allows early retirement without the usual pension reductions that apply when claiming benefits before the standard age.
### Benefits and Implications
Eligible retirees can enjoy the advantage of retiring earlier than the regular retirement age without suffering the typical pension deductions. This is due to the long insurance period requirement, which ensures that these individuals have accumulated substantial pension entitlements [1].
The pension amount is calculated based on pension points, which are accrued through years worked and income level. As a result, the pension can provide a relatively higher monthly pension compared to retiring early without this status [3]. Additionally, retirees who continue working beyond the regular retirement age receive a bonus, with each additional month adding a 0.5% increase to their pension [1].
### Tax and Social Security Considerations When Retiring Early and Continuing to Work
Although there is no legal obligation to retire at the standard retirement age, retirees receiving this pension may continue working without affecting their pension entitlement [1]. However, they will still be subject to progressive income tax, and any additional income from continued employment will also be taxable [2].
Individuals receiving statutory pension are usually covered by a special health insurance scheme for pensioners, called Krankenversicherung der Rentner (KVdR). If insured for at least 90% of the second half of their working life, membership is generally mandatory. Contributions depend on total income, including the pension and any earnings from part-time or full-time work [1].
For pensioners who continue working, social security contributions (e.g., health, pension, unemployment insurance) generally apply to their employment income as usual. The statutory contribution rates for 2025 include 18.6% for pension insurance (split evenly between employer and employee), 2.6% for unemployment insurance, 14.6% for health insurance, and 3.6% for long-term care insurance [4].
### Summary
The "Old-age pension for Particularly Long-insured Persons" offers substantial financial benefits by allowing earlier retirement without pension cuts. Those who continue to work after retirement face normal tax and social security contributions on their earnings but gain pension bonuses and maintain health insurance coverage through the pensioner system. This combination supports both financial security and work flexibility in Germany’s retirement system [1][3][4].
It is advisable to discuss the early retirement decision with your employer, as some employment contracts may not end at retirement age, and terminating them could be considered age discrimination [5]. Additionally, those who do not apply for early retirement are giving up potential money [6].
The coalition is planning to exempt 2000 euros from taxes for those working while receiving a pension (active pension) [7]. However, those who continue working after early retirement will have a higher tax rate on their income due to tax progression and social security contributions, with singles having around 40% deductions from additional income [8].
Currently, about a third of those who retire due to age choose this early retirement option [9]. Employment contracts do not automatically end at retirement age for those who choose early retirement; terminating such contracts would be age discrimination [10].
In conclusion, the "Old-age pension for Particularly Long-insured Persons" provides a valuable option for those who have accumulated 45 years of insurance coverage. It offers financial security, work flexibility, and the potential for higher pension payments compared to retiring at the standard age. However, it is essential to consider the tax and social security implications when making this decision.
References: [1] German Pension Insurance (DRV) [2] Personal Finance [3] Retirement Planning [4] Social Security Contributions [5] Employment Law [6] Financial Advice [7] Tax Reform [8] Taxation and Social Security [9] Retirement Statistics [10] Age Discrimination Laws
The amount of the pension for Particularly Long-insured Persons is calculated based on finance factors like years worked and income level, making it a crucial consideration in personal-finance planning for those planning early retirement in Germany.
Those who continue working past the standard retirement age while receiving the Old-age pension for Particularly Long-insured Persons will still be subject to progressive income tax and social security contributions, which are types of finance-related matters under personal-finance management.
