Boosting your retirement fund in Germany by 200 euros isn't rocket science, but it does require some strategic planning. Every year, the German Pension Insurance sends out a letter showing your projected pension amount. You can also check your pension estimate through the "My Customer Portal" of the German Pension Insurance.
If life's costs pile up beyond your projected pension, don't panic. There are ways to bridge the gap between expectations and reality.
Increasing your pension by 200 Euros: How to pull it off
The smartest move: Purchase pension points
Let's say your projected pension is 1,500 euros, but your expenses sum up to 1,700 euros. To tackle this, you'll need to voluntarily pump 42,683 euros into your pension fund. Here's the breakdown:
- A pension point is equivalent to a monthly pension of 37.60 euros.
- So, one point costs 8,024 euros.
- Investing 42,683 euros gets you 5.31 pension points.
This means you can transition to the standard old-age pension, ensuring an expected retirement income of 1,700 euros. Live your retirement life to the fullest, without budget constraints.
Boosting your German pension by 200 euros is attainable if you play your cards right. Photo: Elmar Stegemann / Pixabay
An alternative route: ETF savings plan
If you'd rather avoid voluntary contributions to pension insurance, you can invest the same 42,683 euros in an ETF (Exchange-traded fund) savings plan instead.
For example, an ETF tracking the leading American index S&P 500 has provided a historically average annual return of 9%. By the time you retire (in about 15 years), your portfolio could reach approximately 155,472 euros.
Don't forget to consider the annual administrative expenses of 0.07% to 0.2%, which might subtract around 5,000 euros from your overall portfolio value.
Lastly, you can withdraw 200 euros a month from this ETF portfolio, effectively upping your pension from 1,500 euros to 1,700 euros.
You call the shots. Select the strategy that aligns with your financial comfort and retirement dreams. Keep in mind that purchasing pension points is a guaranteed, lifelong pension boost, while an ETF balance may dwindle over time.
Bonus Tips:
In the realm of retirement planning, upping your pension beyond the projected amount is achievable through either voluntary contributions or ETF investments.
Voluntary Contributions
- Rürup Pension: Offers tax benefits and flexibility. Contributions are tax-deductible up to 26,528 euros, and contributions can be paused or reduced yet not canceled[1][3].
- Riester Pension: Affords state subsidies and tax deductions. Your maximum yearly contribution is 4% of your gross income, and you could receive up to 300 euros per child[1][3].
ETF Investments
- ETF Savings Plan: A flexible and potentially profitable investment platform with low entry-level costs (10 euros). Returns can outperform pension contributions over extended periods[3], but remember to consider investment risks.
Real Estate Investment
- Property Ownership: Brings in steady income through rent or selling, but this might not be an viable option for everybody due to affordability constraints[3].
Sources:
[1]
[3]
