A significant majority, roughly half of the German population, could retire early, new findings suggest.
In a recent survey conducted by the German Institute for Asset Building and Old-age Provision (DIVA), it was revealed that a significant number of Germans are contemplating early retirement. Michael Heuser, the scientific director of DIVA, shared this insight, but the survey did not provide specific strategies for financing early retirement among Germans.
Nevertheless, general strategies for financing early retirement are well-documented. These include enhanced savings, investments, timing retirement strategically, utilising retirement accounts, pension maximisation, reducing expenses, and creating alternative income streams.
Individuals who save aggressively, often many years before retirement, can benefit from high-yield savings accounts and tax-advantaged retirement accounts. Investing in a diversified portfolio, including stocks, bonds, and real estate, can help grow retirement savings over time. Planning when to retire can be crucial, with retiring later potentially allowing for more years of savings and higher retirement benefits.
Utilising retirement accounts like 401(k) or IRA in the U.S., or similar accounts in other countries, can provide tax advantages to retirement savings. Pension maximisation can be a strategy for those with access to such benefits, by staying in a job long enough to reach full vesting or by contributing to a pension plan. Living frugally and reducing expenses can extend retirement savings further. Creating alternative income streams, such as through part-time work or passive investments, can support an early retirement lifestyle.
The DIVA survey found that 23.5% of the respondents plan to retire before the legal retirement age. Another quarter of potential early retirees plan to use rented properties or stock funds. 26% of potential early retirees secure themselves with additional pension products, such as state-funded Riester or Rürup pensions. The survey was conducted on 1,438 people in Germany aged between 18 and 65.
Interestingly, almost 80% of those who want to work until the legal retirement age do so for financial reasons. Almost half of those who want to work until the legal retirement age also enjoy working. 27.7% of potential early retirees plan to remain professionally active until the legal retirement age, while 28.6% of potential early retirees own a self-occupied property and count on the saved rent.
However, the statutory pension system may face challenges in the long run, as it may have to support more retirees with fewer contributors. Younger workers may have to reckon with their retirement age being raised further from the current 67 years.
Another 35.1% of the surveyed Germans can imagine early retirement, indicating a growing trend among the German workforce. While these strategies are generally applicable, specific data from the DIVA survey or similar German studies could provide more detailed insights into what works best for Germans.
Personal-finance strategies for early retirement among Germans could include creating alternative income streams through part-time work or passive investments, as indicated by 23.5% of the surveyed individuals planning to use rented properties or stock funds. Additionally, some Germans might consider enhancing their savings by utilising retirement accounts like the state-funded Riester or Rürup pensions, as 26% of potential early retirees have secured themselves with these additional pension products.
