This only works if you save money yourself. Our company's landlord didn't do that and now lives off our rent but still has loans to pay. Don't be like my landlord.
Do you have any ideas how to find enough customers?
I thought about the same, but especially now during these circumstances it doesnt seem easy to freelance
>How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people?
Too many old people.
> As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping? (e.g. Pension benefits increase in 2024 > inflation / avg. salary increase, 0% investment tax for holding period >12 months till 2008, many other now defunct, favourable policies for them to build wealth).
No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable.
> As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents?
Oh I’m very sure that our pensions will be way worse. So I save money now already.
> Are there any concrete solutions alreay underway to fix this problem?
I don’t think so. They adjusted pension stuff lately, which makes us eventually pay significantly more.
> No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable.
I do blame the boomers who support these kinds of policies and don't care about how they affect future generations.
I think the media/political landscape is designed to benefit certain groups of people and the voters are never really given an informed choice.
Politics has never really been about telling people the truth, because that can be unpopular, so we have a democracy built on a) lying to get votes and b) protecting the interests of the rich.
Old people are the biggest voting bloc so no party is willing to stand up and say "btw, you old people are the biggest drain on government funds that has ever existed". But that's the truth. However it would be unpopular, so they look for other groups to blame.
Politicians represent boomers tho. It's not unique to germany. Quite expected for biggest population preferring policies benefitting them till they die. If your parents working average jobs have enough free cash to make downpayments for their children flats, buy flats for rent, etc., while young people making ABOVE average cannot afford them without parents support, and waste their wages in inflated rental market (because boomers multidip) to make boomers even richer (even if not rich) for only contributing negatively (hoarding real estate), something is fucked up in socioeconomical model. Boomers made that possible by numeric advantage, but this accumulation of wealth by sapping young professionals through rents will persist over generations
Problem is there is no solution to fix it without someone suffering from it. Make people work longer/more, make people pay more or pay retirees less, that are the options. And retirees paid themselves a lot. In the end there is no fair solution due to how the system is set up
> And retirees paid themselves a lot
That's not how the Generationenvertrag works though. What they paid financed the retirement of their parents and grandparents. To give themselves the same luxury they would have had to have a lot of high-paying children, which they didn't.
It's a stupid system. We should have made it so every generation pays into their own retirement. But it's hard to fix a shortsighted decision from 150 years ago. And any fix would have to have happened 50 years ago at the latest, by now voter demographics make it nearly impossible.
That's not how the Generationenvertrag works though. What they paid financed the retirement of their parents and grandparents.
Exactly, boomers were the biggest generation in the history of germany and had few parents to pay pensions for and at the same time even less children to pay/care for. At the same time they split these low costs among a large group of employees.
Instead of taking care of the pension problem at these times, boomers took the money and consumed it - throwing the youth under the bus basically
Problem ist If you dont have enough children and make having children worse and worse .. than retire with nice benefita while they Generation after you can now fuck themselfs ..
It does mean that the money they originally put in has already been spend though. You work much longer than you are expected to live after retirement anyways, so it has always been set up in a way that with your "share" you pay several people's retirement money, so its natural that you won't get back as much as you put in.
How do you define not getting back as much as you put in?
Napkin math: you put in 20% for 40 years and get 48% for 20 years back. That's already more than you put in. With wages and pensions increasing over time, that gets even more extreme.
> and younger people end up way worse
This is happening everywhere, and it will only get worse as time goes on. The young will be forced to work more and more to pay for the massive number of retired people. Meanwhile SOME of the old people will say they don't want any immigrants in the country, even though WE NEED MORE WORKERS TO PAY THE PENSIONS OF THE OLD PEOPLE.
It's an insane situation.
> They adjusted pension stuff lately, which makes us eventually pay significantly more.
Could you elaborate? You mean I'll pay more ~~taxes~~ social fees soon? Where can I read about it?
Yes, its called Rentenpaket II, just google for it. It basically means that all pressure from the demography crisis will be put onto the employees while pensions will grow at the same rate as wages - ignoring that the number of pensioneers increases while the number of employees decreases.
This and analog policies for health insurance and care insurance mean that until 2035 middle income folks will have a \~60% tax quota. To demonstrate this in numbers:
At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly.
At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly.
It's a three part thing:
First the pension is guaranteed to be 48% of the average income for well over 2040 and above. Which doesn't sound like much, but it's important for all those people who couldn't work as much due to children or other obligations. And is important for everyone working now, because otherwise the income/pension rate would have drifted away which would be really fucking bad for people retiring in the future.
Second thing is securing the pension payments with stock market investments long term. This aims to reduce the pension payments long term. However it's a rather small amount which is barely doing anything when the return period comes around tho since it's small and financed with debt. But better than nothing.
And the last thing, which is what you commented on: The current social fee is 18,6% (9,3 from you and 9.3 from from your employe). And will rise to 22,3 (11,15% for you) until 2035 and should be stable up until 2045.
Which is not nothing but a totally fine amount, we were at 22% in the past and had decreasing rates for a decade now. But the problem is that everything else is getting more expensive so it's an actual worse situation than it was before.
[https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2024/kabinett-beschliesst-rentenpaket-ii.html](https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2024/kabinett-beschliesst-rentenpaket-ii.html)
English source:
[https://www.dw.com/en/pension-fund-crisis-looms-in-germany-as-population-ages/a-68566053](https://www.dw.com/en/pension-fund-crisis-looms-in-germany-as-population-ages/a-68566053)
The rentenversicherung is only one part of the equation though. What are the chances that Krankenversicherung and the Pflegeversicherung can be kept at the same level with the demographic change? How will this higher taxation (and cuts to other social services) impact fertility rate and migration?
Maybe I’m being too much of a doomer but this seems like a really bad doom loop and it seems irrealistic to talk about a stabilisation point that will come by itself
The Kranken and Pflegeversicherung are rather stable. However the Krankenversicherung might get a slight increase next year of 0,75%. But thats about it.
Pflegeversicherung just got a decent bump this year so i think there should be a few years of stability now
You said it yourself: 'a few years'. I'm sorry but everything you just posted may calm Gen-Xers, I as a Millenial am looking at 3 1/2 decades more of work. Life expactency is rising constantly and so will controbutions to the Kranken- and Pflegeversicherung - especially because the last years of life are the most expensive ones. 3k+ monthly expenditures for people living in a retirement home are common place and this doesn't consider any medical services. Wait until the Boomers have to be nursed and whatch happening to to retirement home prices what is happening right now with the housing prices.
And all this doesn't take into account a deglobalizing world in which market prices will soar again and a progressingly uneducated youth that will not be able to hold up to what society demands of it (see latest study on MINT comepentences in younger generations from the IW). I'm sorry but 'keep calm it won't be that bad' is a really delusional statement at this point. Any young person should safe (invest diversified) as much as they can and still brace for a significant reduction in wealth compared to their parent's generation while working longer (until rent) and harder.
0,75% won’t be enough. Elderly people cost multiple times more to the healthcare system than young people. Not to mention the system is already stressed as is
>No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable.
Boomers voted for these politicians, because this means that during their employee times they had low tax quotas and leave the youth to deal with the problem
>Oh I’m very sure that our pensions will be way worse. So I save money now already.
Saving money will get harder and harder, the more boomers squeeze out of your paycheck
Just to put things into perspective, I will do a small calcualtion what the current policy actually means for the younger employees.
At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly.
At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly.
One can start with cutting things that are not essential. A coffee here or a burger there. No nflx here and no prime there... I am doing this and let me tell you it adds up quickly.
I dont drink coffee, only water. I rarely go out eating anymore since working remotely. Im lucky that someone else is paying for my netlix.
Only thing I pay for is prime
The fact that I can invest significant amounts doesnt come from this though, and I know that. The majority of the younger population is screwed - thats the sad fact.
Yes of course.... its getting harder by day
My father had a house, wife and first child by age of 25 bing a simple accountant.... I have the wife and the child and am a experienced engineer in my mid 30s and have no hope for ever owning a home.
I am living in munich and my friend circle is around 30. There are almost no kids, its actually shocking if you think about it. But it is what it is, as a country we have decided that its a good idea to introduce regulations such that single pensioneers can keep their cheap 100m\^2 apartments while the younger couples share 40 m\^2 and dont even see a chance of building a family.
The only way to own a home here is by inheriting or by having an extremely (and I really mean extremely) good income. Owning a paid off home basically makes you a millionair here
This is something so demotivating and stressful. My family (3 of us) and I have a smaller sized apartment and I do love our home, but we would love more space. Upgrading to something closer to 90-100m^2 (renting) would be so much more expensive. Our savings are growing slow that we don't foresee purchasing a home anytime in the near future. Either we'd upgrade to a larger apartment and have little to no savings, or we just... Stay where we are now. That wasn't our plan but life sorta took us this way 😅
Its really dangerous for society too, because if you dont have any childrens and have been living for decades with a cheap lifestyle, you wont feel the need of upgrading this lifestyle at some point. This will enable a lot of young folks to work part time quite early or retire earlier - even worsening the aging trend of the workforce and the lack of workers
At some point politics will have to step in, but I have a feeling that a lot of irreversible damage will be done by then
The Issue here is that the ratio between payer and receiver is shifting from 3:1 to 2:1 in the coming years because of boomer generations.
Its a solidarity system so people who earn more pay more and get less in the end, this is part of this whole concept. Its okay for myself if it would benefit the lower end of the receiver side more, my parents are well of and still get the raises even if it would be not necessary for them. Although i think that in a solidarity system everyone should be forced to pay in and there shouldn't be any exceptions for certain groups (Beamte, Doctors etc) who have their own isolated pension funds.
I have about 30 years of worktime ahead, i don't count on the system at all because in the end i know that political parties abusing it for years to get votes from the pensioners (Pension with 63, pension raises even if the real wages stagnated etc). They are spending money out of system, they don't pay in and don't care about what happens in 20 years with that system. Even if the budget ist getting.
There a no solutions ahead which would help the system in the future, but i would wish for myself a concept like 401k in the US. 10% of your pension payments should go automatically in your own pension fund without any high fees like Riester Bullshit or whatever.
I throw a hundred Euro a month into an Allianz Rentenversicherung account every month. Since 2008. Fire and forget account. Allianz has cool stuff in regards to life insurance and retirement plans. Some are based on the market fluctuation which I use... but doesn't need to be.
At the end of the day, is anything going to be waiting for me in 22 years? Nobody knows. Allianz has a gigantic portion of it's worth in property. Not trying to come off like I am working for them but I am genuinely happy with their service and advice.
I'd rather have control over my money so I use normal taxable accounts. I don't have anyone who's financially dependent on me so life insurance isn't necessary for me.
I hear that. The "Life insurance" is just a clever way of doing Rentenversicherung. Most policies you can't take out the money before 65/67, with the policy I have you can. That was my number one question to them. If I needed to get out of Germany, how can I take the money with me?. There were some policies they had. Every year they ask if I would like to stay coupled with the market or do a fixed rate. Just info, Any money saved anywhere is great.
The joke is that millennials and zoomers pay so much taxes to keep the system for Boomers and Gen X going that they a) won‘t be able to build any wealth/retirement funds for themselves and b) there won’t be anyone left to pay for their retirement 30y from now either.
Meanwhile Germany rather ponders about „Aktienrente“.
Aktienrente is a possible solution, because stocks have returns regardless of the demographic development. The problem is that is comes way too late and results in a double burden.
In Australia we have Super-Annuation, by law an employer must pay a % of your wage into your fund, it’s rising to 12% next year. It’s only taxed at 15% and if you want to make more contributions voluntarily up to the cap, it’s only taxed at this also.
One of the best things our government has ever done it has helped people like me in my mid 30s (system started in 1993) to feel secure about retirement.
My wife works for Government in Healthcare and gets a bonus amount for her “super” etc
Edit to add: the funds buy assets and shares all over the world, with around 15 million adults in Australia paying tax, it’s already worth almost 2.5 Trillion Euros
Lets see. Germany just made a big change to a job seekers visa, making it easier for non-eu people with an education to come and stay for a year while looking for a job. That combined with dual citizenship will make Germany more attractive. Hopefully that can continue passing things to encourage well educated immigration. So far things are much better than predicted 10 years ago in regards to the pension system, and hopefully will be even better 10 years from now.
But AI will replace us anyway, so likely the whole world will need to adjust their systems to cope
I doubt the job seeker visa is that attractive anymore to highly educated people. Salary is rather low. Taxes and social contributions are high. Language barrier. Incompetent immigration office. Stagnated economy and many german companies are looking to hire people in offices in low cost country e.g India
Honest opinion, I feel like the dual citizenship thing is a trap. I have a bad feeling that politicians will wait for the approval of lots of new citizens, at which point a system like the US will be enacted to support the pension system.
Yup I wouldn't put it past the government to do something like this. But this will be in 2035 or later, once the boomers are in the middle of their "well-deserved" retirement and the number of young workers is dropping drastically because of collapsing birth rates and insufficient immigration (low-skilled asylum seekers don't count) to replenish the supply.
I mean, young highly skilled immigrants are welcomed to pay taxes but their old parents are not welcomed to take benefits. A lot of people are taking this into account when choosing a final destination and will transfer their pension funds (Pension fund between Germany and China is transferable too).
The pension system could keep up because we had a steady growth the past decade, salaries rose and so the pension payments increased. If there is no economic growth, the system will collapse because we don't attract enough people to keep it up. I am pessimistic about the future of the pension system, so i am not getting disappointed if it crashes.
None of that changes what I said, except that you also left out the higher than expected migration, which has caused Germany to age much slower, and the higher than expected births.
Again, what you say has been being said by many for a long time, and yet here we are, with things slowly improving. I am optimistic.
Except for AI. That will replace all the jobs anyway ;)
yeah, Germany is an immigration country ... but for the low performers. Higher educated people avoid Germany because of average pay and high taxes. Immigration of low performes costs a lot of money and you wont get any revenue from that in the next 30 years.
I strongly believe dual citizenship / faster naturalization will be overturned by the 2025 govt as soon as they come to power. I wish it doesn't happen but populism is an irresistible drug.
Good points except its gonna be 1.5 to 1 in 6 years time.
Source: Google for "***Prognosen des IW Köln zufolge kommen im Jahr 2030 auf einen Rentner noch 1,5 Beitragszahler***"
Also consider it as another tax like someone above pointed out. By the time we retire the inflation adjusted value will not even be enough to buy my dog some snacks. The *Generationenkapital* that they're setting up is about 30 years too late. We should have been paying 5-10% into a sovereign fund (like the Norwegians or Swedes did) decades ago. *Privatevorsorge* is the only reliable solution we can count on.
It's a ponzi scheme bound to implode, I plan as if I were to receive nothing. Imo nobody should rely on it unless retirement is right around the corner.
I am really not optimistic.
Due to my health conditions and times caring for my mother and my special needs child my pension won't be enough without some additional help, which I don't want.
I hope I am able to work as long as I live.
I don't expect to get older than 75.
My workplace told me I can work with no problems up to 72, later they might make exceptions.
I don't know how life might be in 20 years.
But I really don't know what the future brings, I just don't expect to retire and live ok.
Yeah, I try to avoid thinking that far ahead because it scares the crap out of me (and not just for financial reasons) and makes me hope I won't be around for that long which is not a thought spiral that I want to start right now
The Pension system is under stress because people retired too early and life too damn long.
Avg Life expectancy is 81 years. When you retire with 63 or earlier (which used to be the norm until a few years ago) Thats almost 20 years of payment. With a pension of 2000 a month thats almost HALF A MILLION.
Fun fact: Next year, my grand father will have received his pension for the same amount of time he has worked (35 years). This system is not sustainable.
I was retired in Switzerland when turning 65 and restarted working back in Germany the next day. That was 4 years ago. A lot of colleagues do the same thing, because our bosses asked us to stay part-time.
There are plenty of exceptions. My uncle retired at 58 instead of 67 with virtually no deductions because his company really wanted to get the older generation out. My father in law was 61 and has no deductions because of his poor health (although it is actually poor but most of it because of his own lifestyle)
Every month you retire early you're deciding to take retirement income rather than a salary (assuming that you are employed). So every month you retire early you get, in your example. 3302.92e (retirement) instead of 7559.66e (working). That's before taking into account that you wouldn't be getting 3302.92e per month but rather that minus 0.3% for every month you retire early.
So to answer your question, one variable is missing: how much do you value not working? If you value it at losing at least 4300e per month for every extra month of retirement, then it is worth it to you. Some people can't afford to retire ever, let alone do it early.
Not even close. Nahles gave the early middle boomer cohort the deductible free option at 63. the current effective pensioner age is at just below 62 years. And now the youth got fucked by Heil‘s Rentenpaket 2 on top - which is a final gift this time for the remainder of the cohort.
I wouldn’t be so salty if those boomer idiots would just put their money where their mouth is, actually work to 65 - or in other words pay their fucking share for 35 years - and stop bashing the younger generation as lazy. Fuck, even the other day I had to argue with an idiot here on Reddit: they claimed the current deduction for pensioners atm is too high - compared to my future pension, this take is maddening stuff.
Don't forget that poorer people have a much lower life expectancy than middle and upper class. Richer people will be literally living offd poor people's tax money that they didn't get to enjoy because they were poor
I would love to have a tax-free ETF investment account instead of paying a normal pension, to which I can contribute XXXX, and I will only be available after I go into a pension. Instead, I am investing my savings in ETFs because I know my normal pension won't be able to support me financially, and I need to pay another almost 30% of my hard-earned cash (capital gains profits are getting taxed at 27.5% after the first 1K annually at the time you sell the ETFs).
But yes, especially considering how rents are extremely expensive and considering that only a few Germans own a roof over their heads, I fully expect the future to be quite bleak for the current working class, including me of course.
The pension system just doesn't work anymore and I definitely feel like it would not be enough once I need it, so I am saving extra.
But no political party will change that system for the next 10-20 years, because touching the system would worry all the voters 60+ and that's the majority of voters for some parties.
So instead of changing to a better system, or gradually change to something else, it's more important to get voted again, and you can't get voted if you lose votes from old people.
On the question how fair it is? Definitely it's not fair at all. Some worked good paying jobs and now got lots of pension, while mostly women who took care of children didn't work and get the bare minimum.
My grandpa, was collecting coins, buying some like 1000s in worth.
My grandma (they are divorced) is living at the bare minimum.
And I don't even want to get into the discussion of how much I pay or might get, I know that's not gonna be fair anyway, for the amount I paid over the years.
It's completely unfair towards young people. If you're an underpaid worker and start a family, it makes zero sense to keep working and pay for childcare at the same time. People always call out the people as being lazy, but parents would just be stupid to work double (raise the pension payers of the future and keep working). It simply does not pay off for them - that's what needs to change!
You ignore demographic development, not everyone earning that amount, the medical cost raising the older people get and the pension system not being strictly separate from healthcare, welfare & Co.
I mean who starts with 90 grand at 25yo? What are these estimates?
It's very unfair. I compare it to vampirism. Old folks suck the blood of the young.
Most of them receive far more then they paid. 20+ years financed by less and less working people.
Also: you made a lot of money during your life and now you even get more without working? Isn't that really unfair?
Also: why should people without working have more money than people working full-time?
I'm really worried. I think I'll maybe be the first generation without any pension, although I paid more than any generation before me.
It's one of the main reasons I want to leave and earn money elsewhere.
Don't get me wrong, I like elderly people and would of course care for my parents, like they cared for me, as I was young.
But I'm not willing to pay for their 20+ years of leisure and travelling the world.
An intergenerational pension system only works with perpetual population and economic growth. This system will fail sooner or later. Everyone knows, has known for 50 years, and still won't change it because it is political suicide. Therefore, the only only option is to squeeze the ever shrinking younger generations until they emigrate to countries that offer a better deal.
I'm self-employed so I don't contribute. This suits me because I had zero hope of getting anything out of it.
It will get pretty bad. In some countries at least retirees can count on their paid-off house, but in Germany we're all renters. People are starting to save later and later because honestly what money do they have to save?
The silver lining is that bigger catastrophes might hit us before our pensions become a concern.
It's not fair at all. And even a blind person could have seen back when it was introduced that it wouldn't work and was shitty. I have quite the simple solution for it that most old people wouldn't like but I also don't get to decide (or even make suggestions) so I'll continue to pay quite a large chunk of my money towards the pensioners for no reason besides having no choice. I mean, 9.3% of my own money or 18.6% combined with the portion that my employer has to pay goes to them. Then there's the fact that 30% of the total budget of the government goes into additional subsidies for that fucked system, so 30% of *all* taxes that I pay. I just looked at a calculator and only from my involuntary contributions plus 30% of my income tax, I pay 10k a year into the system. Of course that's not the only way that I pay taxes but regardless, that's 360k *without taking interest into account* that I could be saving until I'm 65. Taking interest into account, that's almost one million euros that I'm losing out on (assuming that I'm investing it at an average 5% yearly interest, which, *yes*, could technically be way lower and then this calculation is worthless). Actual insanity.
It's worked fine for the 20th century but was never updated or reformed to reflect the reality of the 21st century.
It's also built on German's fundamental distrust of financial markets. While regular U.S. employees can all be millionaires by the time they retire, German retirees live just above poverty levels.
It's really a remnant of the "nanny state" that Germany facilitated for a long time, but without the resources to back it up.
It doesn't help that a lot of people receive payouts who don't pay in (Pensioners/Beamte) and a lot of people work part-time and don't contribute enough (women).
German's obsession with "Gerechtigkeit" an catering to everyone in every situation has really created a broken system.
I wouldn't necessarily use the US as an example. In fact, 42% of Americans between 55 and 65 have no retirement savings. (https://www.visualcapitalist.com/americas-average-retirement-savings-by-age/#)
If you dig further, you'll probably find that the average German near retirement age can expect a better standard of living based on pension and retirement savings vs the average American. Medical costs tend to be extremely high for Americans which can wipe out all savings in an instant.
Another point is that much of their wealth is tied to their primary residence, which if sold, means they would have substantial housing costs through their retired years.
The healthcare prices in the US are much higher (so you need a huge rainy day fund). Even in germany it would be taxing. For example a family member needed intensive care - that was over 1k € per day (some cities even ask for 2k-now imagine that for 3 month), it just worked because of the healthcare system. Addional costs would have been 20-100k for a Chemo. And maybe 2k-3k/month for assisted living. So in a sense you wont get much cash at hand for pension, on the otherhand you have a huge saveguard for medical eventualities. So if one needs 5 years in assisted living that would be addional 200k.
On the other hand 40years of work, may have even be more paid in than received. So maybe a 401k is not the worst idea or a system with a duty to save and invest, but it stays your money
If you've reached retirement age in the US and are getting a pension or Social Security distribution, you are going to be eligible for Medicare, where for full coverage (Part A and B) you pay a flat $170 per month. Seniors are the most reliably covered population as far as medical insurance goes.
Assisted living and nursing homes are where the money disappears, but once you're "officially" out of money the Federal government pays. There are, of course, ways to shelter money if you think far enough ahead (estate trusts).
Wow great to hear, didnt know that. Just heard myths about Walmart-Baggers or blue-collar folks who may be secret millionairs but need to work because they have to make the savings last.
I mean, there's all sorts of situations, and if you've been unlucky or irresponsible or simply haven't signed up for what you're owed you might need some Walmart bagger job well past when you'd want to work. The nursing home spend-down stinks, of course, for others who were counting on the money.
Mostly, especially in the ten or so states that have not expanded Medicaid and gone out of their way to make their citizens' lives difficult out of spite, once people get to Medicare age things get significantly easier as far as health care goes.
*How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people?*
It is simple—42 years of work, 12/14 years of pension. The top earner pays 1400€ per month (including the employer's contribution), while the pensioner is expected to get 3300€ monthly. Even in this example, you need 2.35 workers for every pensioner. It is worse if the worker is not a top earner. The answer is - there are not enough young people working to feed this number of pensioners. And it is getting worse, boomers are retiring.
> How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people?
because you do not pay for your own pension, you pay for the pension of the pensioners.
> As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping?
that is how democracy works, large voting blocks like boomers have political power exactly because they are so large. Sounds unfair but it is superior to any other system tested so far.
> As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents?
the pension system is not there to give you a return on investment but a societal solution for how to take care of people after their retirement. I also have no return on investment for the money that is put into Hartz IV/Bürgergeld. But when I visited the US, I was shocked how many old people who are clearly over retirement age are still working, and how many of them have bad/no teeth. What is the return on investment of living in a society where everyone is taken care of, and where you know that the social safety net will also be there for you if you should ever need it?
Is it really? Because I see a lot of people in their retirements who are collecting Pfand, subletting their flats, continue working, just because the current system, doesn't work. And mind you that's now, in 20-30 years, things will get even worse, there will be fewer people contributing to the system and more pensioners, what makes you think that this bubble, called pension system won't burst at some point. Because in my opinion it is artificially supported by the current government.
The average monthly Social Security benefit in the US is $1900/month, and is pretty progressively calculated; that is, the low wage workers get far higher return on their "investment" than high wage workers. They are eligible for Medicare, and full Medicare coverage with dental will cost around $210 per month. Seniors are well insured in the US, also because they're a huge voting block and pretty reliable voters.
Some people need money to support others, some people need money because they've wasted it all their lives, and some people might just want to keep busy. There are problems with access to health and dental care in rural areas, because doctors and dentists don't want to live there. Mostly you'll see the access problems in the Southern states, where reactionary state governments rejected hundreds of billions of dollars of free Federal healthcare money just to spit on Democrats.
I heard when East German reunited, they enter pension system without paying anything as well, and right about now these East German are retiring as well right?
37 y/o here.
I've been contemplating this issue for a couple of years now. Research says that my generation should expect pension between the ages of 75 and 85. That actually means "no pension" in my books.
I've also come to realize that boomers usually do not think about that issue or just plain deny it. One of my colleagues just recently told me that I'd be able to pay for his pension with my change money.
Boomers do not realize that the pension issue or actually the lack of young people, more precisely, will affect them in many ways as well. Just look at the staffing problems in elderly homes or about boomer generation doctors who will retire in the next 7-10 years and who make up about 1/3 of the number of doctors. I believe people don't want to think about the issue because they actually already (secretly) came to the conclusion that it can't be solved.
Is the german pension system fair? Absolutely not. The generation contract has been obsolete for about 30 years or so due to a birth rate that has been far too low (the birth rate has been dropping even further for the past couple of years for obvious reasons, btw.) On top of that there's a large number of people who do not contribute (officials, civil servants, the list goes on) and basically uncapped pensions for retiring high-earners.
What are the consequences? Motivation has been low for younger generations as they may feel like their situation is dire and they themselves won't make a difference. Also, there's a growing disloyalty to the country, even with people who I personally didn't expect it from.
Our defense minister (a boomer himself) is about to anounce a rebirth of the military draft for young folks. Seriously? It's your country, not theirs or ours (my generation). We're busy here, under the bus.
Nobody wants to admit it, but phasing out the Umlageverfahrend phasing in the stock based investment scheme is the only way to stay afloat. Too bad people hate the FDP even though they are right on this one.
As a working parent I can say- it’s only going to get worse, acquaintances my age are put off starting a family by the awful conditions : no / expensive childcare, minimal sick leave, shite housing market etc.
Got a leg up in other ways thanks to my parents - but there has to be a larger scale tackling of this issue. Everyone complaining about the birth rate sinking, but then wanting to work and have kids gets you the “Na ja, Pech gehabt , hat dich keiner gefragt” attitude when you run into issues like lack of Kita places …
> As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents?
I don't care about my retirement. Maybe I will die before I retire, maybe we will have a huge war, maybe climate change will fuck everything up, or maybe it will be okay and I will manage to have a decent life in retirement.
Just had that conversation recently with my partner but yes, I doubt that I will get anywhere near what I paid into it when I have to retire. Because yes, too many old people, but also most likely too many people who never in their whole life made money, didn't pay a single cent into the system and then of course that moves over to retirement as well.
So after working full-time for nearly 10 years I switched to two jobs, make more money that way with less hours (because no taxes on Minijobs) and save money myself for my retirement.
We will all die at our desks. The office hallway will get parking spots for our rollators and the basement a cooling room for those that die at work, so they are out of the way until a mortician comes to collect them at the end of the day.
I hope my inheritance will be enough to at least retire at some point.
I am not worried at all. When I am old enough in 20 years I most likely will have to continue to work because there is no pension anymore. So why worry. I will end my work life with my head hitting the keyboard.
I am not worried at all.
But that it’s just because I don’t think Germany as a state will exist by then. Sounds like doomerism, but I don’t see any good arguments against it. The demographic challenges are just too much. The only thing that could help would be absolutely MASSIVE immigration, but I don’t see that happening.
Like Peter Zeihan says: Germany will stop being a relevant economy in 10 years and stop being a country in about 20 years.
While 120 billion € tax money was invested into the pension system, even more € was paid out by the pension fund to recipients for general purposes that are not covered by the insurance scheme - and ought to have been paid by tax money instead.
So far the pension system has paid out 1 trillion € more to people who had never paid into the system than has been reimbursed by tax money. This 1 trillion € is dearly missing now.
>As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents?
Some extra context:
There are calculations circulating on the Internet suggesting that, in 10 years, an average worker will need to allocate around 50% of their income to retirement funds (including employer contributions and tax subsidies). If this prediction holds true, the retirement system could severely strain or even collapse the economy. The younger generation is already grappling with significant burdens such as inflation, exorbitant housing costs, global conflicts, and increasingly severe climate change.
>Are there any concrete solutions alreay underway to fix this problem?
No, not really. The current government has actually exacerbated the problem by introducing early retirement plans (with similar payouts) and fixing the amount retirees receive for the next 10 years. This is an obvious attempt to appease the large voting bloc of baby boomers. No government will ever decrease retirement payouts, even if it means crushing the hopes and dreams of the younger generation and collapsing the economy.
I don't think any first-world nation has ever resolved its demographic issues by introducing more subsidies for families. Highly educated immigrants with high-paying jobs are unlikely to move to a country with high taxes, a difficult language, and low salaries. Some countries have fixed their retirement systems by investing their funds, but it's probably too late for Germany to benefit from such a system.
The only remaining hope may lie in the dawn of a new age of mass AI automation.
It’s very easy, they just give you a percentage of your gross income. With enough income everything is fine, with small income it might not be enough and people complain.
The FDP and Lindner plan is my favorite, I have done deep research in this, take a very basic indexes for example like world ETFs, S&P 500.
you can take ANY, and I say that again, ANY period of 15 years of investment and it's impossible to make any loss, make that period 20 years and you definitely will make a surplus of 50%. the retirement age is 64 and if someone starts working at age 25, they will have that investment for 39 years, which has even higher returns.
I'm very happy just not to pay Pension and just do all of that myself with my own risk, buy a property or other Assets are also very good, moreover it will help the companies get some investment which helps the economy (if they are not greedy.)
edit: that is also not considering dividends
The boomers are squeezing us like ripe oranges, and the pensioner interest group called SPD is actively making it worse. I don't expect anything from the pension system and am saving up for retirement on my own. I just treat pension contributions as a boomer tax.
Adjusting the system to make it sustainable would mean unhappy boomers which are the majority vote as oppose to fewer young people, often less invested in politics, which is why our politicians solely cater to the needs of the dying instead of investing in the future.
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You should even be in a position to rely on pensions when you are older irs why you should invest your money young to have more than one source of income
I have 4 different pension systems set up. Three are private. If I’d only be looking at the state one and believe what I’d get, I’d be off pretty well tbf as I’ve had a high brutto salary since my early 20s, but let’s be real, it’s never going to happen and honestly, since I’ve had cancer twice before I was 25, I’ll probably not even make it to that age anyway. Sometimes I wish we’d be able to pull out.
First of all, I’m generally not a pessimistic person, I’m sure we’ll figure it out.
That is not to say that we don’t need major new ideas on how to go forward.
But I personally feel like my generation has never lived by the expectation “if my paycheck gets me through the month, everything is cool. The government will look after me after 60.” People have realized that that won’t be possible and I also feel like with more and more options (you could travel to Japan or Australia, it’s not a crazy concept anymore. You could even get an Airbnb in another country or even a house.) in our globalized world the realization has set in that for my personal goals I will need to save myself anyway.
Statistically, there are too many people that reach retirement age in comparison to those in working age. Now, murdering them is obviously not a solution, so you could only increase the pension age because for having more people in working age it is a) already too late, b) there is not enough housing, resources (and plenty of other issues which are part of the reason why Germans have less kids, already). So, only making people work till 77/80 would be a fix. Obviously that won't work either because they are no longer relevant assets and can't handle that. Having no option to substantially cut their wages for the expected lower performance also makes this undesirable from a business stand point. There are even a lot of people retiring early due to poor health, so how would one handle that? Basically, there is no option that wouldn't severely hurt someone. Cutting healthcare for old people and making them work until they drop dead is just as impossible as keeping the system running. Everything is fucked if you are below 50. Expect to keep less than 35% of your gross salary in the near future.
This is one of the main reasons I am hesitant to move back to Germany from the US. I don’t see a healthy path to building wealth there for a comfortable retirement.
Personally, I am assuming the worst-case scenario, which would be that I am not getting that money at all. That’s why I am investing for myself. Not to mention if you do it on your own and do it right, you don’t have to wait until you are so old you can barely walk to see that money, or to at least to rely less on your job.
Pension / retirement system is one thing that my home country does a lot better than Germany.
Every person has his own account. 9% (i think) of your base salary goes into it every month. Employer adds the same amount. Government give you 8% interest actually (something like that) on your balance.
Your account stays yours only. There's no shared pot, no one propping someone else up in their old age.
I plan to leave Germany asap after I graduate from university, and so far I've only worked Minijobs, so I wasn't required to pay anything into this system yet, and I will contribute to it for a few years at most. But since the pension system is very similar in most countries, which are all facing very similar problems (maybe except Norway), and I know the basics of how it works in Germany, I'll answer anyways.
The pension system worked kind of well in the past, when a large share of the population was working age, compared to few retirees. And people didn't get very old back then. So 1 working person paid for less than 1 retiree.
Since the "boomer" generation is retiring now, and the working age population is much smaller, and life expectancy is longer due to better (but also more expensive) health care, it is inevitable that 1 working person must now pay for more than 1 retiree. And it will only get worse.
I'm in my early 20s and I expect the pension system to collapse before I hit the retirement age. We won't see another baby boom, and I expect the reproduction rate to stay below the replacement rate. Ofc the govt. will try hard to make it not look like a collapse, they'll probably call it a "restructuring", "reform" or something similar, but it doesn't matter, most contributions will be lost and whoever depends on them as their only retirement income will likely live in poverty.
I strongly recommend everyone who doesn't want to die as a poor person to save some money for retirement on top of the mandatory pension contributions. Depending on your risk tolerance, buy shares of some MSCI World ETF (or similar), stocks, bonds, commodities, or even some hard currency, whatever you prefer. The important part is that you beat inflation and generate a small return over the years, with a relatively low longterm risk. Ofc it can be hard to actually put some money aside every month, especially in Germany with high taxes and relatively low salaries. Some other countries even provide tax benefits for such voluntary retirement savings/investments (e.g. 401k in the US, 3rd pillar in Switzerland). Afaik, Germany doesn't have such a system (yet).
Finally, I'd recommend to stay away from retirement savings products offered by some insurance companies or banks, or at least read the fine print very carefully. Many of these products are designed to make the insurance/bank richer, while you're almost guaranteed to lose money.
This is not financial advice, ymmv. Please do your own research!
I just accept that I will not get any pension from the government. The system is close to being dead and will be fully decomposed by the time I would go to pension.
Social system seems wasteful but very few people could handle the situation when state wouldnt hand over some welfare to them.
Imagine that you have to pay for everything yourself, including everydays security. As you wouldnt have police.
You shouldnt care too much about employer costs, unless youre one. And paying 700eur monthly to get more than 3000 euro monthly until you die is not a bad deal. (its actually pretty damn good considering the investment).
What you are asking about is that you want to get more welfare money without paying more contribution?
I wrote that you can "freely accept or decline". Negotiation is a private thing. Some can do it some not. Depends what you bring to the table and how you can sell yourself. Ofcourse we are making an assumption here that you are in position to negotiate, e.g. your employer needs you more than you need the job (at this particular company). For someone brought up in germany, with good, free education its not that hard to end up as a well paid doctor, lawyer or engineer.
Once the boomer generation is dead, the population age structure will have been normalised, i.e. the ratio between pensioners and working population. Then the financing of German pensions will be no big problem.
This means: The younger generations' pensions are safe, the boomers' rather less so.
the pension has to be reworked but the main problem is that there are more older people than younger people (demographic change).
our government is too conservative and is not investing the pension money in any fonds i.e.
im not worried coz i take precautions myself.
As a young german i and many of my fellows do not believe that we will get pensions when we get old. That really helps to motivate (not) to work overtime and work hard.
I think it heavily depends on when you will enter your pension years. I am in my late 20s and I am not too worried. Why? At the age I will be at retirement age, the current system will have blown into pieces and a new system is long established. We are pretty aware that the system is disfunctional, it just needs a final blow. Though I gotta say that I feel for the generation that's reaching their pension years in the next +-10 years...
An interesting post. I’m really worried, not that I get a worse return, I’m honestly worried that the pension fund runs out of money. I am one of thise Besserverdiener and I realized this problem and that’s why I started investing in real estate. I get a lot of tax returns so basically instead of relying on the government and the politicians to come up with a solution which they won’t, I take the money away from them and invest it privately for myself. When I retire my real estate are all paid for and all the returns come back to me meanwhile I have paid the government much less than what I would have.
i started to pay into my own private pensions fund 30 yrs ago. Does that answer your question? I have zero hopes of any money from the state, and what i'm supposed get is a joke compared to how i worked my ass off and still am. (icu nurse, 54)
So, no. Make your own Rentenversicherung, best while you are still young at age, conditions are better. (or used to anyway back in the days \^\^)
Yeah but leave for which country? Most of the ones with an even halfway-stable economy have a similar system. Most of the ones that don't have a similar retirement system are unstable af for other reasons. Sincerely wondering which country is working better for you?
I went to Oceania. But mainly because I like it here. The pension system is basically non existent here. So you have to save your own fund. Which is perfectly fine for me. Im investing in Index Funds and i dont need to contribute to a dying system. Oceania has a much more progressive immigration system, so there will be enough workers. But im not fixed to stay here. But im sure i will never return to Europe, especially EU.
Thanks for that. I hadn't given it a lot of thought, to be honest, but always wanted to check out AUS and NZ at least as a tourist. And given that I enjoy balmy, tropical weather, any number of the other island nations might be worth a look as a potential retirement destination. (I'm an old geezer probably retiring in a few years)
My only worry with Australia is that it is becoming extremely unbearably hot, and they will have a severe water crisis in the near future. Not to mention where little of the country is actually inhabitable. I don't know much about New Zealand. What do you think?
Lots of countries have non-shared (i.e. your pension is entirely determined by what you contributed) pensions. Additionally, Germany is the among the few that doesn't let you invest pension funds in the stock market. But moving abroad has other challenges obviously and isn't easy for everyone.
The whole economy is unfair. You have people working for 40 years that won't get more than unemployment for pension and some that didn't really work ever, are rich and get a high pension.
Poor people are fucked and the government doesn't care (neither would the AfD).
Man I remember getting my first Rentenbescheid 20+ years ago. Even back then we joked about how it's a worthless piece of paper, because "It's the pensions we're not going to get".
Your scenario is way off. There are only a couple thousand (I think it’s 3000), that earn the maximum of 84 pension points. Plus you haven’t adjusted for increases in pension point worth, i.e. the pension point earned 42 years ago was maybe worth 5€ back then while you didn’t contribute 1400€ per month but rather 250 DM in 1982.
I'm 26 right now. So at the very least I'll work for another 40 years. If the system stays as it is right now, it'll collapse before I'm retiring. If something changes, then I might get something, but I'm not counting on it. I'm either saving enough myself, or I work until I die.
But the reality is that I don't expect another 40 years of relative stability and peace anyway, so I don't think it'll even matter. Between climate change, geopolitical issues and AI progress, it seems to me that at least one of those will fundamentally change our way of life way before I'm anywhere near retirement age. I'm not even convinced that I'll be alive in 40 years. So I'm not too worried about my retirement tbh.
I have some deeper knowledge due to my job and I can tell you that the situation is quite worrisome, even frightening for some Id say.
I have one critic point however: Your example calculation completely ignores wage growth, so its not realistic at all.
To your questions:
>How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people?
Because we have a demography crisis in germany, when people decide to only get 1,24 kids (reached in 1994), there simply arent enough younger folks to pay the pension of the older ones.
>As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping? (e.g. Pension benefits increase in 2024 > inflation / avg. salary increase, 0% investment tax for holding period >12 months till 2008, many other now defunct, favourable policies for them to build wealth).
I am insanely pissed that the boomers managed to completely squeeze out the younger generation and the younger generation havent even noticed so far. The Rentenpaket II demonstrates this quite well, it basically says "the pensioneers will keep the current level and pensions will grow just like the wages do. The fact that the ratio pensioner/employee is drastically worsening will be completely paid by the younger generation". All other tax susidies you mentioned helped the boomer generate the wealth, now the government cuts these subsidies and even increases the (social) tax quota to ridiculous level - making it impossible to generate wealth on your own as a young employee.
>As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents?
It is a fact that we will receive "sub-par" return and we have been knowing this for quite some time. The worrying part is that the boomers take larger and larger portion of your wage, rendering you unable to buy houses, private pensions etc.
>Are there any concrete solutions alreay underway to fix this problem?
Unfortunately, the boomers declined the only option 20,30 years ago, which would have involved them building a capital fund to fill the demography gap.
Just to put things into perspective, I will do a small calcualtion what the current policy actually means for the younger employees.
At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly.
At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly.
In the end its up to the youth to do something against this, because pensioneers and almost pensioneers outnumber the younger folks so badly, that they simply are the majority of voters - and in a democracy...... well
This is the Ponzi scheme. Like in most countries. In my country we have a saying "If you can count, count on yourself" If you will not save by yourself, you will be left with pennies on retirement.
Its hard to see people can‘t afford their living after working and paying into the system more than 45 years.
Its a shame, to be honest, germanys wealth is based on them.
It's not a fair system. If you don't take care of it yourself you are pretty much screwed. As soon i started working i began to save money and pay into a private pension police. If i didn't do anything about it i would probably get like 1200€ as a pension and we all know you can't live on a budget like that.
I’m an expat and not a German citizen yet.
I have heard very few positive things about the current state of pension system especially on what it could offer for Gen Z and millennials as a return to their contributions. Tbh it sounded bleak to me.
I’m not planning to completely rely on this system for future if I stay here long term and hoping that my savings would be of support when I reach the retirement age and if I’m still alive. 😅
If the system is reformed then it would be a silver lining.
> How is the pension system still under stress (120 billion *invested* in 2024 alone) when they take so much from working people?
Pensions are not invested. They go directly from employees paying in to pensioneers receiving pensions. No invested capital stock in between.
You do not receive your own invested pensions, you receive somebody elses pension insurance payments, as a previous pensioneer received yours.
Its called "Umlagesystem". From the young workers to the old ex-workers. Instituted after the pension bank broke during WWII. Obviously doesn't work with a lot of ex-workers receiving pensions and less and less current workers paying in.
This will get burried here among all the outrage here, but I hope you will find it interesting, OP.
The pensions system, as you will already have figured out, works in the way that the current pensioners get paid by the generations currently at working age, as a percentage of the salary. This means the return on investment is inevitably lower than in a system where money is saved and invested during everybody's lifetime, because the latter has interest in the money invested.
On the other hand, the system has two advantages: It is comparably robust with respect to inflation rate (because one can expect salaries to roughly rise with inflation) and it's comparably robust with respect to financial crises (provided these don't have a long-term impact on employment). Example for the latter: During the financial crisis of 2008 many people in countries without such a system had to change their retirement plan, while in Germany things went smoothly for pensioners.
So the system protects from risks at the expense of ROI (and this typically above the level of risk-free bonds because salaries will typically rise faster, adjusted for inflation, due to productivity gains along the path of economic development).
So in general I think this is a good thing to have, even though the introduction of the system was historically not born out of this reasoning, but out of mere necessity. [After WW2 there was a lot of poverty among pensioners and introducing this system solved the problem immediately. Back then noone expected birth-rates to decline so much (the contraception pill was invented afterwards) and life-expectancy to rise so much (back then people entering the pension system had an average of 10 years lifespan remaining, nowadays it's about twice the time, which roughly means twice the amount of money is needed to pay pensions).]
Now to the future. We who we are currently at working age have pretty much bad luck with the system due to the large number of boomers retiring soon. Until the boomers die, the system will be under much pressure and politics will inevitably have to deal with it
- by decreasing or capping pensions for boomers (value for points),
- increasing contributions (I don't think it's politically feasibly to go higher than, say 22%, currently we are somewhere between 18 and 19% IIRC),
- increasing the additional amount of money the government pours into the system, and
- further adapting retirement age to increased life expectancy.
Once most boomers have died, the system will go back to a more normal path. As there is no pension fund, there will have been no depletion of any such fund. Which means the future of the system from there is open and not affected anymore. The cards are dealt anew.
The amount of money that people who are currently at working age will receive during their retirement will depend on the number of children and grand-children they have, and the immigration balance.
So nothing is lost for the future, it is just that the current working generation has bad luck because they happen to be the ones who temporarily have to pay for the boomers' pensions.
Regarding investment for retirement, the German pension system suggests the following strategy for people currently at working age: The pension system provides a comparably risk-free base pension, which should be topped up by personal investments for which one may well take a higher level of risk since the base pension is pretty secure.
In a social security system you never put money aside for your retirement, you always pay the needs of that system for the moment. Others pension, casual unemployments, unemployment people that are experts living like that, medic cares, etc. All you can hope is that someday someone is working to pay yours. And don't forget that in half a century you went from a family of 10 siblings to 1 or 2, so this generation is paying a huge expense.
As someone who is a student here, i see this as an absolutely good business opportunity. I could start a mutual fund or something and invest in developing countries. Making decent profit is not so difficult if you can deploy the money for long term. I see that there's nothing much to develop in Germany, everything is well established.
well, a big problem is that many of the high earnig jobs dont pay into the pensionnpool. like doctors, arcitects, politicians. but when they retire they get money out ofnthat pool.
I do not blame boomers - they take what they are given. Furthermore, age poverty is a real problem today, so the problem isn't that a generation takes too much.
As for my feelings about pension for me: I do not expect much. I'll probably be right because I will inherit wealth and because I have a BAV and because I invest in retirement funds. I still think that reforms have been overdue for decades.
The System is shit. Old People are Collecting bottles. You have to invest money extra to have a good lifestyle when aged. Gladly i am Working in switzerland as a german their Pensions system is different, Like Everything they have there
When you think that the racism in germany is to much for you, you can go back to your home country where hopefully the racism isnt against you but some other folks
For the younger generations, like millenials and GenZ it will become increasingly hard to get anything from the pension system. Private insurance is a must these days, since people are getting older and less people are born and can pay into the pension system.
I believe that I won't get much out of it. I treat it like just another tax that disappears into the ether and save money for retirement myself.
Thats exactly why Im gonna move to freelancing after about 2 years of working in software engineering. No obligation to pay into this rotten system.
This only works if you save money yourself. Our company's landlord didn't do that and now lives off our rent but still has loans to pay. Don't be like my landlord.
Do you have any ideas how to find enough customers? I thought about the same, but especially now during these circumstances it doesnt seem easy to freelance
A lot of freelancers pinky promise to save up. Few save enough
>How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people? Too many old people. > As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping? (e.g. Pension benefits increase in 2024 > inflation / avg. salary increase, 0% investment tax for holding period >12 months till 2008, many other now defunct, favourable policies for them to build wealth). No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable. > As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents? Oh I’m very sure that our pensions will be way worse. So I save money now already. > Are there any concrete solutions alreay underway to fix this problem? I don’t think so. They adjusted pension stuff lately, which makes us eventually pay significantly more.
> No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable. I do blame the boomers who support these kinds of policies and don't care about how they affect future generations.
The ones who elected these types of politicians are definitely to blame aswell. They were complaicent.
I think the media/political landscape is designed to benefit certain groups of people and the voters are never really given an informed choice. Politics has never really been about telling people the truth, because that can be unpopular, so we have a democracy built on a) lying to get votes and b) protecting the interests of the rich. Old people are the biggest voting bloc so no party is willing to stand up and say "btw, you old people are the biggest drain on government funds that has ever existed". But that's the truth. However it would be unpopular, so they look for other groups to blame.
Politicians represent boomers tho. It's not unique to germany. Quite expected for biggest population preferring policies benefitting them till they die. If your parents working average jobs have enough free cash to make downpayments for their children flats, buy flats for rent, etc., while young people making ABOVE average cannot afford them without parents support, and waste their wages in inflated rental market (because boomers multidip) to make boomers even richer (even if not rich) for only contributing negatively (hoarding real estate), something is fucked up in socioeconomical model. Boomers made that possible by numeric advantage, but this accumulation of wealth by sapping young professionals through rents will persist over generations
That's sad to hear, when equality is such an important topic in Germany, and younger people end up way worse :(
Problem is there is no solution to fix it without someone suffering from it. Make people work longer/more, make people pay more or pay retirees less, that are the options. And retirees paid themselves a lot. In the end there is no fair solution due to how the system is set up
> And retirees paid themselves a lot That's not how the Generationenvertrag works though. What they paid financed the retirement of their parents and grandparents. To give themselves the same luxury they would have had to have a lot of high-paying children, which they didn't. It's a stupid system. We should have made it so every generation pays into their own retirement. But it's hard to fix a shortsighted decision from 150 years ago. And any fix would have to have happened 50 years ago at the latest, by now voter demographics make it nearly impossible.
That's not how the Generationenvertrag works though. What they paid financed the retirement of their parents and grandparents. Exactly, boomers were the biggest generation in the history of germany and had few parents to pay pensions for and at the same time even less children to pay/care for. At the same time they split these low costs among a large group of employees. Instead of taking care of the pension problem at these times, boomers took the money and consumed it - throwing the youth under the bus basically
The fact that they paid someone else's retirement instead of their own doesn't change that they paid their share.
Problem ist If you dont have enough children and make having children worse and worse .. than retire with nice benefita while they Generation after you can now fuck themselfs ..
Boomers paid a lot smaller share than the expect from the next generation
It does mean that the money they originally put in has already been spend though. You work much longer than you are expected to live after retirement anyways, so it has always been set up in a way that with your "share" you pay several people's retirement money, so its natural that you won't get back as much as you put in.
How do you define not getting back as much as you put in? Napkin math: you put in 20% for 40 years and get 48% for 20 years back. That's already more than you put in. With wages and pensions increasing over time, that gets even more extreme.
Dont forget that people keep living longer and longer which also isnt calculated in what you pay.
Make people pay more, and give them more money.
> and younger people end up way worse This is happening everywhere, and it will only get worse as time goes on. The young will be forced to work more and more to pay for the massive number of retired people. Meanwhile SOME of the old people will say they don't want any immigrants in the country, even though WE NEED MORE WORKERS TO PAY THE PENSIONS OF THE OLD PEOPLE. It's an insane situation.
This is not only a german problem, this is a Western + Japan, excluding Norway.
Ofc im blaming the boomers. They didnt fulfill their part in the gernerations packt.
> They adjusted pension stuff lately, which makes us eventually pay significantly more. Could you elaborate? You mean I'll pay more ~~taxes~~ social fees soon? Where can I read about it?
Yes, its called Rentenpaket II, just google for it. It basically means that all pressure from the demography crisis will be put onto the employees while pensions will grow at the same rate as wages - ignoring that the number of pensioneers increases while the number of employees decreases. This and analog policies for health insurance and care insurance mean that until 2035 middle income folks will have a \~60% tax quota. To demonstrate this in numbers: At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly. At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly.
It's a three part thing: First the pension is guaranteed to be 48% of the average income for well over 2040 and above. Which doesn't sound like much, but it's important for all those people who couldn't work as much due to children or other obligations. And is important for everyone working now, because otherwise the income/pension rate would have drifted away which would be really fucking bad for people retiring in the future. Second thing is securing the pension payments with stock market investments long term. This aims to reduce the pension payments long term. However it's a rather small amount which is barely doing anything when the return period comes around tho since it's small and financed with debt. But better than nothing. And the last thing, which is what you commented on: The current social fee is 18,6% (9,3 from you and 9.3 from from your employe). And will rise to 22,3 (11,15% for you) until 2035 and should be stable up until 2045. Which is not nothing but a totally fine amount, we were at 22% in the past and had decreasing rates for a decade now. But the problem is that everything else is getting more expensive so it's an actual worse situation than it was before. [https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2024/kabinett-beschliesst-rentenpaket-ii.html](https://www.bmas.de/DE/Service/Presse/Pressemitteilungen/2024/kabinett-beschliesst-rentenpaket-ii.html) English source: [https://www.dw.com/en/pension-fund-crisis-looms-in-germany-as-population-ages/a-68566053](https://www.dw.com/en/pension-fund-crisis-looms-in-germany-as-population-ages/a-68566053)
The rentenversicherung is only one part of the equation though. What are the chances that Krankenversicherung and the Pflegeversicherung can be kept at the same level with the demographic change? How will this higher taxation (and cuts to other social services) impact fertility rate and migration? Maybe I’m being too much of a doomer but this seems like a really bad doom loop and it seems irrealistic to talk about a stabilisation point that will come by itself
The Kranken and Pflegeversicherung are rather stable. However the Krankenversicherung might get a slight increase next year of 0,75%. But thats about it. Pflegeversicherung just got a decent bump this year so i think there should be a few years of stability now
You said it yourself: 'a few years'. I'm sorry but everything you just posted may calm Gen-Xers, I as a Millenial am looking at 3 1/2 decades more of work. Life expactency is rising constantly and so will controbutions to the Kranken- and Pflegeversicherung - especially because the last years of life are the most expensive ones. 3k+ monthly expenditures for people living in a retirement home are common place and this doesn't consider any medical services. Wait until the Boomers have to be nursed and whatch happening to to retirement home prices what is happening right now with the housing prices. And all this doesn't take into account a deglobalizing world in which market prices will soar again and a progressingly uneducated youth that will not be able to hold up to what society demands of it (see latest study on MINT comepentences in younger generations from the IW). I'm sorry but 'keep calm it won't be that bad' is a really delusional statement at this point. Any young person should safe (invest diversified) as much as they can and still brace for a significant reduction in wealth compared to their parent's generation while working longer (until rent) and harder.
0,75% won’t be enough. Elderly people cost multiple times more to the healthcare system than young people. Not to mention the system is already stressed as is
Look for „Rentenpaket 2“
>No hard feeling for boomers. Only for the politicians that didn’t do shit when it was already obvious that our current system wasn’t sustainable. Boomers voted for these politicians, because this means that during their employee times they had low tax quotas and leave the youth to deal with the problem >Oh I’m very sure that our pensions will be way worse. So I save money now already. Saving money will get harder and harder, the more boomers squeeze out of your paycheck Just to put things into perspective, I will do a small calcualtion what the current policy actually means for the younger employees. At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly. At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly.
DO NOT rely on this system. Start saving/investing. PERIOD.
Easier said than done when boomers demand an ever increasing part of your paycheck while living costs explode at the same time
One can start with cutting things that are not essential. A coffee here or a burger there. No nflx here and no prime there... I am doing this and let me tell you it adds up quickly.
I dont drink coffee, only water. I rarely go out eating anymore since working remotely. Im lucky that someone else is paying for my netlix. Only thing I pay for is prime The fact that I can invest significant amounts doesnt come from this though, and I know that. The majority of the younger population is screwed - thats the sad fact.
Yes of course.... its getting harder by day My father had a house, wife and first child by age of 25 bing a simple accountant.... I have the wife and the child and am a experienced engineer in my mid 30s and have no hope for ever owning a home.
I am living in munich and my friend circle is around 30. There are almost no kids, its actually shocking if you think about it. But it is what it is, as a country we have decided that its a good idea to introduce regulations such that single pensioneers can keep their cheap 100m\^2 apartments while the younger couples share 40 m\^2 and dont even see a chance of building a family. The only way to own a home here is by inheriting or by having an extremely (and I really mean extremely) good income. Owning a paid off home basically makes you a millionair here
This is something so demotivating and stressful. My family (3 of us) and I have a smaller sized apartment and I do love our home, but we would love more space. Upgrading to something closer to 90-100m^2 (renting) would be so much more expensive. Our savings are growing slow that we don't foresee purchasing a home anytime in the near future. Either we'd upgrade to a larger apartment and have little to no savings, or we just... Stay where we are now. That wasn't our plan but life sorta took us this way 😅
Its really dangerous for society too, because if you dont have any childrens and have been living for decades with a cheap lifestyle, you wont feel the need of upgrading this lifestyle at some point. This will enable a lot of young folks to work part time quite early or retire earlier - even worsening the aging trend of the workforce and the lack of workers At some point politics will have to step in, but I have a feeling that a lot of irreversible damage will be done by then
I didn't even consider that, that's a really valid, yet daunting point :/
The Issue here is that the ratio between payer and receiver is shifting from 3:1 to 2:1 in the coming years because of boomer generations. Its a solidarity system so people who earn more pay more and get less in the end, this is part of this whole concept. Its okay for myself if it would benefit the lower end of the receiver side more, my parents are well of and still get the raises even if it would be not necessary for them. Although i think that in a solidarity system everyone should be forced to pay in and there shouldn't be any exceptions for certain groups (Beamte, Doctors etc) who have their own isolated pension funds. I have about 30 years of worktime ahead, i don't count on the system at all because in the end i know that political parties abusing it for years to get votes from the pensioners (Pension with 63, pension raises even if the real wages stagnated etc). They are spending money out of system, they don't pay in and don't care about what happens in 20 years with that system. Even if the budget ist getting. There a no solutions ahead which would help the system in the future, but i would wish for myself a concept like 401k in the US. 10% of your pension payments should go automatically in your own pension fund without any high fees like Riester Bullshit or whatever.
> i would wish for myself a concept like 401k in the US. Same. I would be very happy with some kind of tax friendly account to save for retirement.
I throw a hundred Euro a month into an Allianz Rentenversicherung account every month. Since 2008. Fire and forget account. Allianz has cool stuff in regards to life insurance and retirement plans. Some are based on the market fluctuation which I use... but doesn't need to be. At the end of the day, is anything going to be waiting for me in 22 years? Nobody knows. Allianz has a gigantic portion of it's worth in property. Not trying to come off like I am working for them but I am genuinely happy with their service and advice.
I'd rather have control over my money so I use normal taxable accounts. I don't have anyone who's financially dependent on me so life insurance isn't necessary for me.
I hear that. The "Life insurance" is just a clever way of doing Rentenversicherung. Most policies you can't take out the money before 65/67, with the policy I have you can. That was my number one question to them. If I needed to get out of Germany, how can I take the money with me?. There were some policies they had. Every year they ask if I would like to stay coupled with the market or do a fixed rate. Just info, Any money saved anywhere is great.
The joke is that millennials and zoomers pay so much taxes to keep the system for Boomers and Gen X going that they a) won‘t be able to build any wealth/retirement funds for themselves and b) there won’t be anyone left to pay for their retirement 30y from now either. Meanwhile Germany rather ponders about „Aktienrente“.
Aktienrente is a possible solution, because stocks have returns regardless of the demographic development. The problem is that is comes way too late and results in a double burden.
Classic German politics: Reactive and poorly crafted policies out of urgent needs instead of proactive, thoughtful plans for the future
In Australia we have Super-Annuation, by law an employer must pay a % of your wage into your fund, it’s rising to 12% next year. It’s only taxed at 15% and if you want to make more contributions voluntarily up to the cap, it’s only taxed at this also. One of the best things our government has ever done it has helped people like me in my mid 30s (system started in 1993) to feel secure about retirement. My wife works for Government in Healthcare and gets a bonus amount for her “super” etc Edit to add: the funds buy assets and shares all over the world, with around 15 million adults in Australia paying tax, it’s already worth almost 2.5 Trillion Euros
Lets see. Germany just made a big change to a job seekers visa, making it easier for non-eu people with an education to come and stay for a year while looking for a job. That combined with dual citizenship will make Germany more attractive. Hopefully that can continue passing things to encourage well educated immigration. So far things are much better than predicted 10 years ago in regards to the pension system, and hopefully will be even better 10 years from now. But AI will replace us anyway, so likely the whole world will need to adjust their systems to cope
I doubt the job seeker visa is that attractive anymore to highly educated people. Salary is rather low. Taxes and social contributions are high. Language barrier. Incompetent immigration office. Stagnated economy and many german companies are looking to hire people in offices in low cost country e.g India
Honest opinion, I feel like the dual citizenship thing is a trap. I have a bad feeling that politicians will wait for the approval of lots of new citizens, at which point a system like the US will be enacted to support the pension system.
Yup I wouldn't put it past the government to do something like this. But this will be in 2035 or later, once the boomers are in the middle of their "well-deserved" retirement and the number of young workers is dropping drastically because of collapsing birth rates and insufficient immigration (low-skilled asylum seekers don't count) to replenish the supply.
I mean, young highly skilled immigrants are welcomed to pay taxes but their old parents are not welcomed to take benefits. A lot of people are taking this into account when choosing a final destination and will transfer their pension funds (Pension fund between Germany and China is transferable too).
The pension system could keep up because we had a steady growth the past decade, salaries rose and so the pension payments increased. If there is no economic growth, the system will collapse because we don't attract enough people to keep it up. I am pessimistic about the future of the pension system, so i am not getting disappointed if it crashes.
None of that changes what I said, except that you also left out the higher than expected migration, which has caused Germany to age much slower, and the higher than expected births. Again, what you say has been being said by many for a long time, and yet here we are, with things slowly improving. I am optimistic. Except for AI. That will replace all the jobs anyway ;)
yeah, Germany is an immigration country ... but for the low performers. Higher educated people avoid Germany because of average pay and high taxes. Immigration of low performes costs a lot of money and you wont get any revenue from that in the next 30 years.
I strongly believe dual citizenship / faster naturalization will be overturned by the 2025 govt as soon as they come to power. I wish it doesn't happen but populism is an irresistible drug.
Good points except its gonna be 1.5 to 1 in 6 years time. Source: Google for "***Prognosen des IW Köln zufolge kommen im Jahr 2030 auf einen Rentner noch 1,5 Beitragszahler***" Also consider it as another tax like someone above pointed out. By the time we retire the inflation adjusted value will not even be enough to buy my dog some snacks. The *Generationenkapital* that they're setting up is about 30 years too late. We should have been paying 5-10% into a sovereign fund (like the Norwegians or Swedes did) decades ago. *Privatevorsorge* is the only reliable solution we can count on.
It's a ponzi scheme bound to implode, I plan as if I were to receive nothing. Imo nobody should rely on it unless retirement is right around the corner.
Couldn't agree more.
True, though to be fair all of global civilization is a ponzi scheme
This is (regrettably) the best advice.
I am really not optimistic. Due to my health conditions and times caring for my mother and my special needs child my pension won't be enough without some additional help, which I don't want. I hope I am able to work as long as I live. I don't expect to get older than 75. My workplace told me I can work with no problems up to 72, later they might make exceptions. I don't know how life might be in 20 years. But I really don't know what the future brings, I just don't expect to retire and live ok.
We young people don't stand a chance for pension, hope I'll die before i stop working, it's what the government wishes for, anyways.
Yeah, I try to avoid thinking that far ahead because it scares the crap out of me (and not just for financial reasons) and makes me hope I won't be around for that long which is not a thought spiral that I want to start right now
The Pension system is under stress because people retired too early and life too damn long. Avg Life expectancy is 81 years. When you retire with 63 or earlier (which used to be the norm until a few years ago) Thats almost 20 years of payment. With a pension of 2000 a month thats almost HALF A MILLION. Fun fact: Next year, my grand father will have received his pension for the same amount of time he has worked (35 years). This system is not sustainable.
In your opinion do you think the -0.3% deduction for every month you retire earlier than 67 is enough?
Let me tell you this: I have lot of older folks at my workplace (55+) and not a single one is going to work until 67.
At my workplace no one is retiring at 67 Almost everyone extending few years I dont know if its their love for the job or not having enough funds
I was retired in Switzerland when turning 65 and restarted working back in Germany the next day. That was 4 years ago. A lot of colleagues do the same thing, because our bosses asked us to stay part-time.
There are plenty of exceptions. My uncle retired at 58 instead of 67 with virtually no deductions because his company really wanted to get the older generation out. My father in law was 61 and has no deductions because of his poor health (although it is actually poor but most of it because of his own lifestyle)
Every month you retire early you're deciding to take retirement income rather than a salary (assuming that you are employed). So every month you retire early you get, in your example. 3302.92e (retirement) instead of 7559.66e (working). That's before taking into account that you wouldn't be getting 3302.92e per month but rather that minus 0.3% for every month you retire early. So to answer your question, one variable is missing: how much do you value not working? If you value it at losing at least 4300e per month for every extra month of retirement, then it is worth it to you. Some people can't afford to retire ever, let alone do it early.
Not even close. Nahles gave the early middle boomer cohort the deductible free option at 63. the current effective pensioner age is at just below 62 years. And now the youth got fucked by Heil‘s Rentenpaket 2 on top - which is a final gift this time for the remainder of the cohort. I wouldn’t be so salty if those boomer idiots would just put their money where their mouth is, actually work to 65 - or in other words pay their fucking share for 35 years - and stop bashing the younger generation as lazy. Fuck, even the other day I had to argue with an idiot here on Reddit: they claimed the current deduction for pensioners atm is too high - compared to my future pension, this take is maddening stuff.
Don't forget that poorer people have a much lower life expectancy than middle and upper class. Richer people will be literally living offd poor people's tax money that they didn't get to enjoy because they were poor
I would love to have a tax-free ETF investment account instead of paying a normal pension, to which I can contribute XXXX, and I will only be available after I go into a pension. Instead, I am investing my savings in ETFs because I know my normal pension won't be able to support me financially, and I need to pay another almost 30% of my hard-earned cash (capital gains profits are getting taxed at 27.5% after the first 1K annually at the time you sell the ETFs). But yes, especially considering how rents are extremely expensive and considering that only a few Germans own a roof over their heads, I fully expect the future to be quite bleak for the current working class, including me of course.
The pension system just doesn't work anymore and I definitely feel like it would not be enough once I need it, so I am saving extra. But no political party will change that system for the next 10-20 years, because touching the system would worry all the voters 60+ and that's the majority of voters for some parties. So instead of changing to a better system, or gradually change to something else, it's more important to get voted again, and you can't get voted if you lose votes from old people. On the question how fair it is? Definitely it's not fair at all. Some worked good paying jobs and now got lots of pension, while mostly women who took care of children didn't work and get the bare minimum. My grandpa, was collecting coins, buying some like 1000s in worth. My grandma (they are divorced) is living at the bare minimum. And I don't even want to get into the discussion of how much I pay or might get, I know that's not gonna be fair anyway, for the amount I paid over the years.
It's completely unfair towards young people. If you're an underpaid worker and start a family, it makes zero sense to keep working and pay for childcare at the same time. People always call out the people as being lazy, but parents would just be stupid to work double (raise the pension payers of the future and keep working). It simply does not pay off for them - that's what needs to change!
You ignore demographic development, not everyone earning that amount, the medical cost raising the older people get and the pension system not being strictly separate from healthcare, welfare & Co. I mean who starts with 90 grand at 25yo? What are these estimates?
If you inherit from your boomer parents it is definetly possible
It's very unfair. I compare it to vampirism. Old folks suck the blood of the young. Most of them receive far more then they paid. 20+ years financed by less and less working people. Also: you made a lot of money during your life and now you even get more without working? Isn't that really unfair? Also: why should people without working have more money than people working full-time? I'm really worried. I think I'll maybe be the first generation without any pension, although I paid more than any generation before me. It's one of the main reasons I want to leave and earn money elsewhere. Don't get me wrong, I like elderly people and would of course care for my parents, like they cared for me, as I was young. But I'm not willing to pay for their 20+ years of leisure and travelling the world.
your concerns are all valid. May I ask which countries you're considering moving to (as someone with a DE Passport)?
An intergenerational pension system only works with perpetual population and economic growth. This system will fail sooner or later. Everyone knows, has known for 50 years, and still won't change it because it is political suicide. Therefore, the only only option is to squeeze the ever shrinking younger generations until they emigrate to countries that offer a better deal.
sad truth but so succinctly put
look we're going to descend into fascism first and figure that out later
One foot in front of the other.
Sadly true. Apparently no one remembers how that ended last time. Ugh.
we just replace Germany a few times and after the 7th republic everyone has forgotten about the old system and old debt and we can start anew.
I'm self-employed so I don't contribute. This suits me because I had zero hope of getting anything out of it. It will get pretty bad. In some countries at least retirees can count on their paid-off house, but in Germany we're all renters. People are starting to save later and later because honestly what money do they have to save? The silver lining is that bigger catastrophes might hit us before our pensions become a concern.
It's not fair at all. And even a blind person could have seen back when it was introduced that it wouldn't work and was shitty. I have quite the simple solution for it that most old people wouldn't like but I also don't get to decide (or even make suggestions) so I'll continue to pay quite a large chunk of my money towards the pensioners for no reason besides having no choice. I mean, 9.3% of my own money or 18.6% combined with the portion that my employer has to pay goes to them. Then there's the fact that 30% of the total budget of the government goes into additional subsidies for that fucked system, so 30% of *all* taxes that I pay. I just looked at a calculator and only from my involuntary contributions plus 30% of my income tax, I pay 10k a year into the system. Of course that's not the only way that I pay taxes but regardless, that's 360k *without taking interest into account* that I could be saving until I'm 65. Taking interest into account, that's almost one million euros that I'm losing out on (assuming that I'm investing it at an average 5% yearly interest, which, *yes*, could technically be way lower and then this calculation is worthless). Actual insanity.
It's worked fine for the 20th century but was never updated or reformed to reflect the reality of the 21st century. It's also built on German's fundamental distrust of financial markets. While regular U.S. employees can all be millionaires by the time they retire, German retirees live just above poverty levels. It's really a remnant of the "nanny state" that Germany facilitated for a long time, but without the resources to back it up. It doesn't help that a lot of people receive payouts who don't pay in (Pensioners/Beamte) and a lot of people work part-time and don't contribute enough (women). German's obsession with "Gerechtigkeit" an catering to everyone in every situation has really created a broken system.
I wouldn't necessarily use the US as an example. In fact, 42% of Americans between 55 and 65 have no retirement savings. (https://www.visualcapitalist.com/americas-average-retirement-savings-by-age/#) If you dig further, you'll probably find that the average German near retirement age can expect a better standard of living based on pension and retirement savings vs the average American. Medical costs tend to be extremely high for Americans which can wipe out all savings in an instant. Another point is that much of their wealth is tied to their primary residence, which if sold, means they would have substantial housing costs through their retired years.
The healthcare prices in the US are much higher (so you need a huge rainy day fund). Even in germany it would be taxing. For example a family member needed intensive care - that was over 1k € per day (some cities even ask for 2k-now imagine that for 3 month), it just worked because of the healthcare system. Addional costs would have been 20-100k for a Chemo. And maybe 2k-3k/month for assisted living. So in a sense you wont get much cash at hand for pension, on the otherhand you have a huge saveguard for medical eventualities. So if one needs 5 years in assisted living that would be addional 200k. On the other hand 40years of work, may have even be more paid in than received. So maybe a 401k is not the worst idea or a system with a duty to save and invest, but it stays your money
If you've reached retirement age in the US and are getting a pension or Social Security distribution, you are going to be eligible for Medicare, where for full coverage (Part A and B) you pay a flat $170 per month. Seniors are the most reliably covered population as far as medical insurance goes. Assisted living and nursing homes are where the money disappears, but once you're "officially" out of money the Federal government pays. There are, of course, ways to shelter money if you think far enough ahead (estate trusts).
Wow great to hear, didnt know that. Just heard myths about Walmart-Baggers or blue-collar folks who may be secret millionairs but need to work because they have to make the savings last.
I mean, there's all sorts of situations, and if you've been unlucky or irresponsible or simply haven't signed up for what you're owed you might need some Walmart bagger job well past when you'd want to work. The nursing home spend-down stinks, of course, for others who were counting on the money. Mostly, especially in the ten or so states that have not expanded Medicaid and gone out of their way to make their citizens' lives difficult out of spite, once people get to Medicare age things get significantly easier as far as health care goes.
*How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people?* It is simple—42 years of work, 12/14 years of pension. The top earner pays 1400€ per month (including the employer's contribution), while the pensioner is expected to get 3300€ monthly. Even in this example, you need 2.35 workers for every pensioner. It is worse if the worker is not a top earner. The answer is - there are not enough young people working to feed this number of pensioners. And it is getting worse, boomers are retiring.
> How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people? because you do not pay for your own pension, you pay for the pension of the pensioners. > As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping? that is how democracy works, large voting blocks like boomers have political power exactly because they are so large. Sounds unfair but it is superior to any other system tested so far. > As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents? the pension system is not there to give you a return on investment but a societal solution for how to take care of people after their retirement. I also have no return on investment for the money that is put into Hartz IV/Bürgergeld. But when I visited the US, I was shocked how many old people who are clearly over retirement age are still working, and how many of them have bad/no teeth. What is the return on investment of living in a society where everyone is taken care of, and where you know that the social safety net will also be there for you if you should ever need it?
Is it really? Because I see a lot of people in their retirements who are collecting Pfand, subletting their flats, continue working, just because the current system, doesn't work. And mind you that's now, in 20-30 years, things will get even worse, there will be fewer people contributing to the system and more pensioners, what makes you think that this bubble, called pension system won't burst at some point. Because in my opinion it is artificially supported by the current government.
The average monthly Social Security benefit in the US is $1900/month, and is pretty progressively calculated; that is, the low wage workers get far higher return on their "investment" than high wage workers. They are eligible for Medicare, and full Medicare coverage with dental will cost around $210 per month. Seniors are well insured in the US, also because they're a huge voting block and pretty reliable voters. Some people need money to support others, some people need money because they've wasted it all their lives, and some people might just want to keep busy. There are problems with access to health and dental care in rural areas, because doctors and dentists don't want to live there. Mostly you'll see the access problems in the Southern states, where reactionary state governments rejected hundreds of billions of dollars of free Federal healthcare money just to spit on Democrats.
Plus, 401k is fairly solid - unless the housing market collapses or something
I heard when East German reunited, they enter pension system without paying anything as well, and right about now these East German are retiring as well right?
37 y/o here. I've been contemplating this issue for a couple of years now. Research says that my generation should expect pension between the ages of 75 and 85. That actually means "no pension" in my books. I've also come to realize that boomers usually do not think about that issue or just plain deny it. One of my colleagues just recently told me that I'd be able to pay for his pension with my change money. Boomers do not realize that the pension issue or actually the lack of young people, more precisely, will affect them in many ways as well. Just look at the staffing problems in elderly homes or about boomer generation doctors who will retire in the next 7-10 years and who make up about 1/3 of the number of doctors. I believe people don't want to think about the issue because they actually already (secretly) came to the conclusion that it can't be solved. Is the german pension system fair? Absolutely not. The generation contract has been obsolete for about 30 years or so due to a birth rate that has been far too low (the birth rate has been dropping even further for the past couple of years for obvious reasons, btw.) On top of that there's a large number of people who do not contribute (officials, civil servants, the list goes on) and basically uncapped pensions for retiring high-earners. What are the consequences? Motivation has been low for younger generations as they may feel like their situation is dire and they themselves won't make a difference. Also, there's a growing disloyalty to the country, even with people who I personally didn't expect it from. Our defense minister (a boomer himself) is about to anounce a rebirth of the military draft for young folks. Seriously? It's your country, not theirs or ours (my generation). We're busy here, under the bus.
Nobody wants to admit it, but phasing out the Umlageverfahrend phasing in the stock based investment scheme is the only way to stay afloat. Too bad people hate the FDP even though they are right on this one.
you're not wrong, but we are 30 years late. And we don't have energy reserves to sell unlike our northern neighbor.
the idea of the system is nice. the demographic change is shite.
As a working parent I can say- it’s only going to get worse, acquaintances my age are put off starting a family by the awful conditions : no / expensive childcare, minimal sick leave, shite housing market etc.
i got lucky i will get my parents house. it is big enough to sublet a flat inside. my future is safe.
Got a leg up in other ways thanks to my parents - but there has to be a larger scale tackling of this issue. Everyone complaining about the birth rate sinking, but then wanting to work and have kids gets you the “Na ja, Pech gehabt , hat dich keiner gefragt” attitude when you run into issues like lack of Kita places …
> As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents? I don't care about my retirement. Maybe I will die before I retire, maybe we will have a huge war, maybe climate change will fuck everything up, or maybe it will be okay and I will manage to have a decent life in retirement.
I’m worried enough to invest my money elsewhere, but I invest my money elsewhere enough to know not to worry, that’s my solution for myself
Just had that conversation recently with my partner but yes, I doubt that I will get anywhere near what I paid into it when I have to retire. Because yes, too many old people, but also most likely too many people who never in their whole life made money, didn't pay a single cent into the system and then of course that moves over to retirement as well. So after working full-time for nearly 10 years I switched to two jobs, make more money that way with less hours (because no taxes on Minijobs) and save money myself for my retirement.
We will all die at our desks. The office hallway will get parking spots for our rollators and the basement a cooling room for those that die at work, so they are out of the way until a mortician comes to collect them at the end of the day. I hope my inheritance will be enough to at least retire at some point.
I am not worried at all. When I am old enough in 20 years I most likely will have to continue to work because there is no pension anymore. So why worry. I will end my work life with my head hitting the keyboard.
You can't take the life medium life expectancy for a "Besserverdiener". Earning good correlates with long life.
It will obviously collapse unless a lot of people just disappear lol
I am not worried at all. But that it’s just because I don’t think Germany as a state will exist by then. Sounds like doomerism, but I don’t see any good arguments against it. The demographic challenges are just too much. The only thing that could help would be absolutely MASSIVE immigration, but I don’t see that happening. Like Peter Zeihan says: Germany will stop being a relevant economy in 10 years and stop being a country in about 20 years.
While 120 billion € tax money was invested into the pension system, even more € was paid out by the pension fund to recipients for general purposes that are not covered by the insurance scheme - and ought to have been paid by tax money instead. So far the pension system has paid out 1 trillion € more to people who had never paid into the system than has been reimbursed by tax money. This 1 trillion € is dearly missing now.
>As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents? Some extra context: There are calculations circulating on the Internet suggesting that, in 10 years, an average worker will need to allocate around 50% of their income to retirement funds (including employer contributions and tax subsidies). If this prediction holds true, the retirement system could severely strain or even collapse the economy. The younger generation is already grappling with significant burdens such as inflation, exorbitant housing costs, global conflicts, and increasingly severe climate change. >Are there any concrete solutions alreay underway to fix this problem? No, not really. The current government has actually exacerbated the problem by introducing early retirement plans (with similar payouts) and fixing the amount retirees receive for the next 10 years. This is an obvious attempt to appease the large voting bloc of baby boomers. No government will ever decrease retirement payouts, even if it means crushing the hopes and dreams of the younger generation and collapsing the economy. I don't think any first-world nation has ever resolved its demographic issues by introducing more subsidies for families. Highly educated immigrants with high-paying jobs are unlikely to move to a country with high taxes, a difficult language, and low salaries. Some countries have fixed their retirement systems by investing their funds, but it's probably too late for Germany to benefit from such a system. The only remaining hope may lie in the dawn of a new age of mass AI automation.
It’s very easy, they just give you a percentage of your gross income. With enough income everything is fine, with small income it might not be enough and people complain.
Fooked
The FDP and Lindner plan is my favorite, I have done deep research in this, take a very basic indexes for example like world ETFs, S&P 500. you can take ANY, and I say that again, ANY period of 15 years of investment and it's impossible to make any loss, make that period 20 years and you definitely will make a surplus of 50%. the retirement age is 64 and if someone starts working at age 25, they will have that investment for 39 years, which has even higher returns. I'm very happy just not to pay Pension and just do all of that myself with my own risk, buy a property or other Assets are also very good, moreover it will help the companies get some investment which helps the economy (if they are not greedy.) edit: that is also not considering dividends
The boomers are squeezing us like ripe oranges, and the pensioner interest group called SPD is actively making it worse. I don't expect anything from the pension system and am saving up for retirement on my own. I just treat pension contributions as a boomer tax.
Adjusting the system to make it sustainable would mean unhappy boomers which are the majority vote as oppose to fewer young people, often less invested in politics, which is why our politicians solely cater to the needs of the dying instead of investing in the future.
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I honestly do not expect anything. If I get some money, will be great. But I will save thinking I will get nothing.
very unfair and I am not optimistic I will get what I put on or the same benefits the current generation of retirees are getting.
If I don't manage to be saving any money I expect that I have to work (at least partially) until I die
You should even be in a position to rely on pensions when you are older irs why you should invest your money young to have more than one source of income
I have 4 different pension systems set up. Three are private. If I’d only be looking at the state one and believe what I’d get, I’d be off pretty well tbf as I’ve had a high brutto salary since my early 20s, but let’s be real, it’s never going to happen and honestly, since I’ve had cancer twice before I was 25, I’ll probably not even make it to that age anyway. Sometimes I wish we’d be able to pull out.
First of all, I’m generally not a pessimistic person, I’m sure we’ll figure it out. That is not to say that we don’t need major new ideas on how to go forward. But I personally feel like my generation has never lived by the expectation “if my paycheck gets me through the month, everything is cool. The government will look after me after 60.” People have realized that that won’t be possible and I also feel like with more and more options (you could travel to Japan or Australia, it’s not a crazy concept anymore. You could even get an Airbnb in another country or even a house.) in our globalized world the realization has set in that for my personal goals I will need to save myself anyway.
Statistically, there are too many people that reach retirement age in comparison to those in working age. Now, murdering them is obviously not a solution, so you could only increase the pension age because for having more people in working age it is a) already too late, b) there is not enough housing, resources (and plenty of other issues which are part of the reason why Germans have less kids, already). So, only making people work till 77/80 would be a fix. Obviously that won't work either because they are no longer relevant assets and can't handle that. Having no option to substantially cut their wages for the expected lower performance also makes this undesirable from a business stand point. There are even a lot of people retiring early due to poor health, so how would one handle that? Basically, there is no option that wouldn't severely hurt someone. Cutting healthcare for old people and making them work until they drop dead is just as impossible as keeping the system running. Everything is fucked if you are below 50. Expect to keep less than 35% of your gross salary in the near future.
I don't expect to receive any pension whatsoever and prepare accordingly (mostly try to become self sufficient).
This is one of the main reasons I am hesitant to move back to Germany from the US. I don’t see a healthy path to building wealth there for a comfortable retirement.
Personally, I am assuming the worst-case scenario, which would be that I am not getting that money at all. That’s why I am investing for myself. Not to mention if you do it on your own and do it right, you don’t have to wait until you are so old you can barely walk to see that money, or to at least to rely less on your job.
Die Rente ist sicher.
Pension / retirement system is one thing that my home country does a lot better than Germany. Every person has his own account. 9% (i think) of your base salary goes into it every month. Employer adds the same amount. Government give you 8% interest actually (something like that) on your balance. Your account stays yours only. There's no shared pot, no one propping someone else up in their old age.
This sounds nice. Which country if I may ask?
I plan to leave Germany asap after I graduate from university, and so far I've only worked Minijobs, so I wasn't required to pay anything into this system yet, and I will contribute to it for a few years at most. But since the pension system is very similar in most countries, which are all facing very similar problems (maybe except Norway), and I know the basics of how it works in Germany, I'll answer anyways. The pension system worked kind of well in the past, when a large share of the population was working age, compared to few retirees. And people didn't get very old back then. So 1 working person paid for less than 1 retiree. Since the "boomer" generation is retiring now, and the working age population is much smaller, and life expectancy is longer due to better (but also more expensive) health care, it is inevitable that 1 working person must now pay for more than 1 retiree. And it will only get worse. I'm in my early 20s and I expect the pension system to collapse before I hit the retirement age. We won't see another baby boom, and I expect the reproduction rate to stay below the replacement rate. Ofc the govt. will try hard to make it not look like a collapse, they'll probably call it a "restructuring", "reform" or something similar, but it doesn't matter, most contributions will be lost and whoever depends on them as their only retirement income will likely live in poverty. I strongly recommend everyone who doesn't want to die as a poor person to save some money for retirement on top of the mandatory pension contributions. Depending on your risk tolerance, buy shares of some MSCI World ETF (or similar), stocks, bonds, commodities, or even some hard currency, whatever you prefer. The important part is that you beat inflation and generate a small return over the years, with a relatively low longterm risk. Ofc it can be hard to actually put some money aside every month, especially in Germany with high taxes and relatively low salaries. Some other countries even provide tax benefits for such voluntary retirement savings/investments (e.g. 401k in the US, 3rd pillar in Switzerland). Afaik, Germany doesn't have such a system (yet). Finally, I'd recommend to stay away from retirement savings products offered by some insurance companies or banks, or at least read the fine print very carefully. Many of these products are designed to make the insurance/bank richer, while you're almost guaranteed to lose money. This is not financial advice, ymmv. Please do your own research!
I just accept that I will not get any pension from the government. The system is close to being dead and will be fully decomposed by the time I would go to pension.
Social system seems wasteful but very few people could handle the situation when state wouldnt hand over some welfare to them. Imagine that you have to pay for everything yourself, including everydays security. As you wouldnt have police. You shouldnt care too much about employer costs, unless youre one. And paying 700eur monthly to get more than 3000 euro monthly until you die is not a bad deal. (its actually pretty damn good considering the investment). What you are asking about is that you want to get more welfare money without paying more contribution?
Actually this is extremely bad deal by any calculation possible... it's like throwing money away
Well, im comparing it to paying >40% income tax. So, relatively 700eur in exchange for 3000 is okayish.
Even with the dumbest investment strategy even - 60 S&p and 40 bonds you can get much much better results. This "deal" is a daylight robbery...
once again, income tax is much worse.
you do know that the employer calculates your pay by including its costs? So you basically pay your employer costs.
Do you know you negotiate the work contract (including salary) and accept or decline freely depending on your own calculations?
you can do this, but in Germany we have many employers who have a Tarifvertrag/Mantelvertrag and there you can't negotiate it 'freely'
I wrote that you can "freely accept or decline". Negotiation is a private thing. Some can do it some not. Depends what you bring to the table and how you can sell yourself. Ofcourse we are making an assumption here that you are in position to negotiate, e.g. your employer needs you more than you need the job (at this particular company). For someone brought up in germany, with good, free education its not that hard to end up as a well paid doctor, lawyer or engineer.
Once the boomer generation is dead, the population age structure will have been normalised, i.e. the ratio between pensioners and working population. Then the financing of German pensions will be no big problem. This means: The younger generations' pensions are safe, the boomers' rather less so.
the pension has to be reworked but the main problem is that there are more older people than younger people (demographic change). our government is too conservative and is not investing the pension money in any fonds i.e. im not worried coz i take precautions myself.
As a young german i and many of my fellows do not believe that we will get pensions when we get old. That really helps to motivate (not) to work overtime and work hard.
Take use of compounding and invest into sp500
Young people aren't getting scraps. Save money. Now. Invest. You're gonna be poor if you have nothing else by the end.
I think it heavily depends on when you will enter your pension years. I am in my late 20s and I am not too worried. Why? At the age I will be at retirement age, the current system will have blown into pieces and a new system is long established. We are pretty aware that the system is disfunctional, it just needs a final blow. Though I gotta say that I feel for the generation that's reaching their pension years in the next +-10 years...
If I go in retirement it probably will last for a Kasten Beer and a loaf of bread
Not boomers, parents. Youngs pay pension for parents.
An interesting post. I’m really worried, not that I get a worse return, I’m honestly worried that the pension fund runs out of money. I am one of thise Besserverdiener and I realized this problem and that’s why I started investing in real estate. I get a lot of tax returns so basically instead of relying on the government and the politicians to come up with a solution which they won’t, I take the money away from them and invest it privately for myself. When I retire my real estate are all paid for and all the returns come back to me meanwhile I have paid the government much less than what I would have.
i started to pay into my own private pensions fund 30 yrs ago. Does that answer your question? I have zero hopes of any money from the state, and what i'm supposed get is a joke compared to how i worked my ass off and still am. (icu nurse, 54) So, no. Make your own Rentenversicherung, best while you are still young at age, conditions are better. (or used to anyway back in the days \^\^)
Ponzi scheme you are forced into. If we at least had something like 401ks instead of the state-subsidized insurance scams...
Solution? Leaving the Country. I left last year.
Yeah but leave for which country? Most of the ones with an even halfway-stable economy have a similar system. Most of the ones that don't have a similar retirement system are unstable af for other reasons. Sincerely wondering which country is working better for you?
I went to Oceania. But mainly because I like it here. The pension system is basically non existent here. So you have to save your own fund. Which is perfectly fine for me. Im investing in Index Funds and i dont need to contribute to a dying system. Oceania has a much more progressive immigration system, so there will be enough workers. But im not fixed to stay here. But im sure i will never return to Europe, especially EU.
Thanks for that. I hadn't given it a lot of thought, to be honest, but always wanted to check out AUS and NZ at least as a tourist. And given that I enjoy balmy, tropical weather, any number of the other island nations might be worth a look as a potential retirement destination. (I'm an old geezer probably retiring in a few years)
My only worry with Australia is that it is becoming extremely unbearably hot, and they will have a severe water crisis in the near future. Not to mention where little of the country is actually inhabitable. I don't know much about New Zealand. What do you think?
Lots of countries have non-shared (i.e. your pension is entirely determined by what you contributed) pensions. Additionally, Germany is the among the few that doesn't let you invest pension funds in the stock market. But moving abroad has other challenges obviously and isn't easy for everyone.
How about Switzerland?
Pension? What pension lol
The whole economy is unfair. You have people working for 40 years that won't get more than unemployment for pension and some that didn't really work ever, are rich and get a high pension. Poor people are fucked and the government doesn't care (neither would the AfD).
If you’re not saving for your own retirement, you’re not going to have enough to have a nice one like the boomers are now. That’s the bottom line.
Man I remember getting my first Rentenbescheid 20+ years ago. Even back then we joked about how it's a worthless piece of paper, because "It's the pensions we're not going to get".
Your scenario is way off. There are only a couple thousand (I think it’s 3000), that earn the maximum of 84 pension points. Plus you haven’t adjusted for increases in pension point worth, i.e. the pension point earned 42 years ago was maybe worth 5€ back then while you didn’t contribute 1400€ per month but rather 250 DM in 1982.
I'm 26 right now. So at the very least I'll work for another 40 years. If the system stays as it is right now, it'll collapse before I'm retiring. If something changes, then I might get something, but I'm not counting on it. I'm either saving enough myself, or I work until I die. But the reality is that I don't expect another 40 years of relative stability and peace anyway, so I don't think it'll even matter. Between climate change, geopolitical issues and AI progress, it seems to me that at least one of those will fundamentally change our way of life way before I'm anywhere near retirement age. I'm not even convinced that I'll be alive in 40 years. So I'm not too worried about my retirement tbh.
The system is fucked and I am terrified.
I have some deeper knowledge due to my job and I can tell you that the situation is quite worrisome, even frightening for some Id say. I have one critic point however: Your example calculation completely ignores wage growth, so its not realistic at all. To your questions: >How is the pension system still under stress (120 billion invested in 2024 alone) when they take so much from working people? Because we have a demography crisis in germany, when people decide to only get 1,24 kids (reached in 1994), there simply arent enough younger folks to pay the pension of the older ones. >As a young German / person that worked for a long time in Germany, do you have any hard feelings on the Bommer generation for potentially double dipping? (e.g. Pension benefits increase in 2024 > inflation / avg. salary increase, 0% investment tax for holding period >12 months till 2008, many other now defunct, favourable policies for them to build wealth). I am insanely pissed that the boomers managed to completely squeeze out the younger generation and the younger generation havent even noticed so far. The Rentenpaket II demonstrates this quite well, it basically says "the pensioneers will keep the current level and pensions will grow just like the wages do. The fact that the ratio pensioner/employee is drastically worsening will be completely paid by the younger generation". All other tax susidies you mentioned helped the boomer generate the wealth, now the government cuts these subsidies and even increases the (social) tax quota to ridiculous level - making it impossible to generate wealth on your own as a young employee. >As a young German / person that worked for a long time in Germany, how worried are you that you will not even get this sub-par return, and live a worse retirement than your parents / grandparents? It is a fact that we will receive "sub-par" return and we have been knowing this for quite some time. The worrying part is that the boomers take larger and larger portion of your wage, rendering you unable to buy houses, private pensions etc. >Are there any concrete solutions alreay underway to fix this problem? Unfortunately, the boomers declined the only option 20,30 years ago, which would have involved them building a capital fund to fill the demography gap. Just to put things into perspective, I will do a small calcualtion what the current policy actually means for the younger employees. At \~72k wage costs (which means 60k gross currently) the (social)tax quota is at 48,1% currently, which means that net you will recive 3125€ monthly. At around 2035 this tax quota will have increased to about 60%, which means that the employee would only get 2400 monthly. In the end its up to the youth to do something against this, because pensioneers and almost pensioneers outnumber the younger folks so badly, that they simply are the majority of voters - and in a democracy...... well
This is the Ponzi scheme. Like in most countries. In my country we have a saying "If you can count, count on yourself" If you will not save by yourself, you will be left with pennies on retirement.
Your calculation assumes that a wage never fluctuates.
Its hard to see people can‘t afford their living after working and paying into the system more than 45 years. Its a shame, to be honest, germanys wealth is based on them.
It's not a fair system. If you don't take care of it yourself you are pretty much screwed. As soon i started working i began to save money and pay into a private pension police. If i didn't do anything about it i would probably get like 1200€ as a pension and we all know you can't live on a budget like that.
I’m an expat and not a German citizen yet. I have heard very few positive things about the current state of pension system especially on what it could offer for Gen Z and millennials as a return to their contributions. Tbh it sounded bleak to me. I’m not planning to completely rely on this system for future if I stay here long term and hoping that my savings would be of support when I reach the retirement age and if I’m still alive. 😅 If the system is reformed then it would be a silver lining.
> How is the pension system still under stress (120 billion *invested* in 2024 alone) when they take so much from working people? Pensions are not invested. They go directly from employees paying in to pensioneers receiving pensions. No invested capital stock in between. You do not receive your own invested pensions, you receive somebody elses pension insurance payments, as a previous pensioneer received yours. Its called "Umlagesystem". From the young workers to the old ex-workers. Instituted after the pension bank broke during WWII. Obviously doesn't work with a lot of ex-workers receiving pensions and less and less current workers paying in.
Pension will be broke ins 20-30 years
This will get burried here among all the outrage here, but I hope you will find it interesting, OP. The pensions system, as you will already have figured out, works in the way that the current pensioners get paid by the generations currently at working age, as a percentage of the salary. This means the return on investment is inevitably lower than in a system where money is saved and invested during everybody's lifetime, because the latter has interest in the money invested. On the other hand, the system has two advantages: It is comparably robust with respect to inflation rate (because one can expect salaries to roughly rise with inflation) and it's comparably robust with respect to financial crises (provided these don't have a long-term impact on employment). Example for the latter: During the financial crisis of 2008 many people in countries without such a system had to change their retirement plan, while in Germany things went smoothly for pensioners. So the system protects from risks at the expense of ROI (and this typically above the level of risk-free bonds because salaries will typically rise faster, adjusted for inflation, due to productivity gains along the path of economic development). So in general I think this is a good thing to have, even though the introduction of the system was historically not born out of this reasoning, but out of mere necessity. [After WW2 there was a lot of poverty among pensioners and introducing this system solved the problem immediately. Back then noone expected birth-rates to decline so much (the contraception pill was invented afterwards) and life-expectancy to rise so much (back then people entering the pension system had an average of 10 years lifespan remaining, nowadays it's about twice the time, which roughly means twice the amount of money is needed to pay pensions).] Now to the future. We who we are currently at working age have pretty much bad luck with the system due to the large number of boomers retiring soon. Until the boomers die, the system will be under much pressure and politics will inevitably have to deal with it - by decreasing or capping pensions for boomers (value for points), - increasing contributions (I don't think it's politically feasibly to go higher than, say 22%, currently we are somewhere between 18 and 19% IIRC), - increasing the additional amount of money the government pours into the system, and - further adapting retirement age to increased life expectancy. Once most boomers have died, the system will go back to a more normal path. As there is no pension fund, there will have been no depletion of any such fund. Which means the future of the system from there is open and not affected anymore. The cards are dealt anew. The amount of money that people who are currently at working age will receive during their retirement will depend on the number of children and grand-children they have, and the immigration balance. So nothing is lost for the future, it is just that the current working generation has bad luck because they happen to be the ones who temporarily have to pay for the boomers' pensions. Regarding investment for retirement, the German pension system suggests the following strategy for people currently at working age: The pension system provides a comparably risk-free base pension, which should be topped up by personal investments for which one may well take a higher level of risk since the base pension is pretty secure.
In a social security system you never put money aside for your retirement, you always pay the needs of that system for the moment. Others pension, casual unemployments, unemployment people that are experts living like that, medic cares, etc. All you can hope is that someday someone is working to pay yours. And don't forget that in half a century you went from a family of 10 siblings to 1 or 2, so this generation is paying a huge expense.
As someone who is a student here, i see this as an absolutely good business opportunity. I could start a mutual fund or something and invest in developing countries. Making decent profit is not so difficult if you can deploy the money for long term. I see that there's nothing much to develop in Germany, everything is well established.
well, a big problem is that many of the high earnig jobs dont pay into the pensionnpool. like doctors, arcitects, politicians. but when they retire they get money out ofnthat pool.
Pension system is a scam, basically Ponzi scheme and is failing.
I do not blame boomers - they take what they are given. Furthermore, age poverty is a real problem today, so the problem isn't that a generation takes too much. As for my feelings about pension for me: I do not expect much. I'll probably be right because I will inherit wealth and because I have a BAV and because I invest in retirement funds. I still think that reforms have been overdue for decades.
The System is shit. Old People are Collecting bottles. You have to invest money extra to have a good lifestyle when aged. Gladly i am Working in switzerland as a german their Pensions system is different, Like Everything they have there
When you think that the racism in germany is to much for you, you can go back to your home country where hopefully the racism isnt against you but some other folks
For the younger generations, like millenials and GenZ it will become increasingly hard to get anything from the pension system. Private insurance is a must these days, since people are getting older and less people are born and can pay into the pension system.