What do I have to bear in mind when planning my retirement? When can I retire? Can I take partial retirement in several stages? Should I take my retirement benefits as a lump sum or as a pension? What are the financial and tax consequences? Here are the most important things to consider for anyone planning their retirement.
So, you’re at least 58 years old and planning to stop working. That means there are important decisions for you to take, which will determine your financial circumstances for the rest of your life and can’t be reversed later. These fundamental decisions must be guided by your health, your family circumstances and your financial situation. What is vital is that you calculate the tax implications of your course of action and your personal budget for the time after retirement. Take enough time to plan your retirement and discuss it in advance with the people close to you.
Draw up a budget listing your main income and expenses for the time after retirement. Examine the tax and inheritance implications in particular and clarify these with an expert.
With comPlan, you can, in principle, retire at any time between your 58th and 65th birthday. This rule applies to women and men alike. You can also, in consultation with your employer, retire in a number of stages. However, such stages in partial retirement may be taken only at intervals of twelve months. The earlier you retire, the less you will receive in retirement benefits. Your benefits are reduced if you retire early because you have made savings contributions, and your retirement savings have borne interest, for a shorter period. Apart from that, the conversion rate is lower, as your life expectancy at the time you retire early is higher and you will be receiving the retirement pension for longer.
You can retire at any time between the ages of 58 and 65, and, with your employer's agreement, can do it in several stages.
You can find out the amount of your retirement savings and of your retirement pension between the ages of 58 and 65 from your statement of insurance for each completed year of life. To calculate your lifelong retirement pension, multiply your retirement savings by the conversion rate, which is dependent on your age. The amount of your bridging pension and of any child pensions will also be shown on your statement of insurance. You can use comPlan Online to calculate for yourself retirement dates which are between two full years of life.
You can use comPlan Online at any time to calculate the amount of retirement benefits for each retirement date.
You can decide for yourself whether you want, when you retire, to take your retirement savings as a one-off lump sum or to convert them into a pension for the rest of your life. You can also take any percentage of your savings you wish as a lump sum and convert the rest into a pension. However, in accordance with our pension fund regulations, you must notify us of a capital withdrawal in writing at least one month prior to your retirement. If you are married or in a registered partnership, you must have this application co-signed by your spouse or registered partner and certified by a notary. Changes to the submitted application may be made up to one month prior to your retirement and must also be co-signed by your partner (with certification from a notary).
When you retire, you can take all or part of your retirement savings as a lump sum or convert them into a pension for the rest of your life.
The advantage of a retirement pension is that you get a guaranteed income for the rest of your life. Your spouse or partner also gets a lifelong survivor's pension when you die. And a pension spares you the time and effort involved in investing.
On the other hand, a lump sum does mean you have the freedom and flexibility to do what you like with your money. The capital passes to your heirs when you die. You also have the opportunity to generate a positive return by investing it. At the same time, though, you do of course bear the risk of any losses. If you take out all the capital, you cease to be insured with us. In this case, your bridging pension will also be paid out as a lump sum and there will be no retirement child pensions or benefits for future survivors. So, then, from the moment you take out all the capital, you bear all the investment, longevity and mortality risks yourself.
A lump sum provides greater flexibility and a pension more security. Check out their advantages and disadvantages for your own situation in detail.
Pension payments must be fully taxed as normal income for the rest of your life. Lump-sum payments are taxed once at a reduced tax rate, which varies depending on the municipality, your marital status and denomination, and the amount involved. They are taxed quite separately from your taxable income. Once received, lump sums are subject to wealth tax, and income from capital is taxed as income. If you withdraw a lump sum, the tax authorities will also check whether you have made tax-privileged purchases into the pension fund in the three years before your retirement, as there is a three-year blocking period for lump-sum payments after such purchases are made. If you have failed to comply with this blocking period or are unable to do so, you will be required to pay income tax on the purchases you have already made. An exception is made for repayments of advances on divorce.
If you are domiciled abroad for tax purposes, though, your tax situation may be quite different. If you are, we recommend that you clarify the tax implications of a lump-sum or retirement pension with the tax authorities there or discuss them with a tax advisor.
Your tax situation when drawing a lump sum differs from that when you are receiving a pension. Whatever you decide to do, it is absolutely essential that you take into account its tax implications, but without basing your decision as to whether to opt for a lump sum or a pension on them to the exclusion of any other considerations.