Abstract: Financial retirement provision is the accumulation of capital for later retirement. There are many different ways of providing for old age. For example, in addition to traditional private pension contracts such as life insurance and annuities, state-subsidized pension paths can also be used – for example, the Riester Pension.
It is obvious that old-age provision is becoming increasingly important. The so-called demographic change leads to the fact that the pensions of more and more older people must be financed by relatively fewer young workers. So the state pensions will have to decrease – at least adjusted for inflation. In order to maintain the standard of living achieved over the course of a lifetime, financial provision for old age is practically indispensable.
Old age provision – what is it ? What types of retirement provision are there?
Retirement plans – 3 ways
Many people do not deal with the subject of old-age provision at a young age. One thinks, it is still sufficient time, in order to inform about it and possibly make any precautions. It is more important than ever to think about pension provision for old age, as experts have been emphasizing time and again for years. The population in Germany is getting older and older, which also has an impact on pensions.
Corresponding coffers are becoming increasingly empty. If you want to enjoy your retirement without financial worries, a private pension is usually indispensable. Legislators have also recognized this and created various options for private retirement planning. You can find out what these are in the following guidebook.
Private pension – the different types
Concerning the national pension is for a long time safe: With it alone it cannot be probably lived carefree in the age, since the pensions will fail ever smaller. The supply gap, which results from the difference between the pension and the supply need, is to be closed with the private age precaution, in order to prevent an impending age poverty. It's important to start thinking about the future now and start looking into private retirement planning early on. Here are some options for this:
Retirement provision option number 1: State-subsidized Riester pension
The Riester pension is a funded pension plan and is especially recommended for those who receive a government subsidy and the boss also pays something in addition. Parents receive a bonus of 185 euros per year for children born up to 2007 and 300 euros per year for children born from 2008 onwards.
But it's not just low-income earners with several children who benefit; a Riester savings plan can also make sense for higher-earning singles. Newcomers to the workforce receive a one-time bonus of 200 euros until they reach the age of 25. They save the contributions with the Riester pension and in retirement they are paid out in a lifelong pension. In this way, you can supplement the statutory pension and compensate for the reduction in the pension level. The earlier you start saving, the better it is. On the one hand the contributions are lower and on the other hand you get more interest.
Retirement provision option number 2: Rurup pension with state and tax incentives
The Rurup pension, also known as the basic pension, is another private pension plan designed primarily for the self-employed as an alternative to the Riester pension. In the deposit phase you save cash, because you can deduct the contributions in the tax return as special expenses and thus build up a fortune with the saved taxes. Receive a monthly pension in old age.
This pays off especially for freelancers and the self-employed, as well as high-earning employees and civil servants. The pension gap is particularly large for the latter in retirement, as income above the contribution limit is not taken into account when calculating pension entitlements. You can choose the payment method and the pension start date with complete flexibility and make additional payments at any time.
You cannot terminate a Rurup contract early, only release the contributions. It is neither lendable nor inheritable or transferable. However, it is possible to agree on a type of survivor's pension.
Retirement provision option number 3: Classic pension insurance
Unlike unit-linked annuities, you do not have to worry about price fluctuations and losses with the classic annuity. Accordingly, it does not yield high returns either. In return, the agreed pension is secure. Due to subsidies may be a plus. The classic pension insurance is therefore the perfect choice for all those who rely primarily on security for their retirement provision.
Experts describe them as crisis-proof and reliable. You pay a monthly contribution to the insurer. The saved capital earns interest at the contractually agreed interest rate minus the costs incurred. If the insurance company makes a profit, additional surpluses can accrue. At the end of the contract period, you will receive a guaranteed monthly pension for as long as you live.
Old-age provision possibility number 4: Company pension scheme
With a company pension plan, you're usually better off
The company pension scheme, also known as the occupational pension, is another variant. Regardless of whether full or part-time, every employee in this country has the right to it. There are various options, for example: Direct insurance, pension fund, pension fund, pension commitment or support fund.
Most companies offer direct insurance and pension funds. Unterstutzungskasse and Pensionszusage are quite complex and pension funds are used in large companies.
– With direct insurance, often offered in small and medium-sized companies, the employer takes out a life insurance policy on behalf of the employee. At the end of the contract period, he receives the payout, usually with guaranteed interest.
Direct insurance can be taken out as a group contract, i.e. for several employees. This is often more cost-effective than individual contracts. In the case of direct insurance, benefits for possible occupational disability and protection for surviving dependents can also be integrated into the contract.
– In relation to the pension fund, the boss takes out life insurance for the employee with the pension fund. The legally independent insurance company is subject to the German insurance supervisory authority BaFin. Disability and survivor benefits can also be covered.
– Support fund describes a legally independent institution of several companies. It is particularly suitable for high earners and executives. The contributions are tax-free and flow into the reinsured provident fund. The exact amount of the company pension depends to a large extent on the commitment of the boss, who only guarantees a minimum payment. However, it may increase by excess depending on earnings.
– In the case of a pension commitment, the employer undertakes to provide for the employee from the company's assets as soon as he or she retires. It is particularly suitable for employees with high incomes.
– Pension funds are independent of companies. Here investors put a larger part of their money investment in shares. Savers, however, have to accept trade-offs in terms of guarantee. Employees can choose a higher share if they wish.
If your employer does not offer a company pension plan, you can opt for a pension fund or direct insurance policy. This takes the form of deferred compensation, so that the contribution is deducted from gross income. The money goes into the contract that the boss makes for the employee.
Conclusion
If you rely on the state pension, you will have a hard time maintaining your standard of living in old age. Start looking at your retirement savings early if you don't want to limit yourself financially in retirement. This includes taking an interest in current economic news.
With the state-subsidized Riester and Rurup pensions, you save the contributions and receive a monthly pension for life in retirement. Another option is the classic, crisis-proof pension insurance, which is one of the safest variants. In addition, you can use a company pension plan. Whatever you choose, think about tomorrow today. Make provisions for old age early to enjoy a carefree retirement.