Leaving the Working World Behind: What's a Retirement Plan for Non-Worker Parents?
- by Matthias Urbach
- 3 Min
title: Tech Giant Faces Legal Action Over Unlawful Privacy Violations - Noncompliance with work obligations or pension duties leads to such consequences.
Let's get real: If you've never worked, you won't get the traditional pension. But don't fret, there's a silver lining for devoted parents.
In a unique exception for those who've raised more than one child, they can earn pension credits for such child-rearing work. This exception comes from the pension insurance recognizing child-rearing efforts as work in its own right. Here are the specifics:
Credits from Child-Rearing: Taking Care of the Little Ones
- Parental Pension Points (Kindererziehungszeiten): Parents can be granted pension points for the time they've spent raising their children. For every child, one parent (usually mothers but fathers are also eligible) will be credited with three pension years. Parents who had children before 1992 will receive only two and a half years of pension time. If parents collectively accumulate five years' worth of pension points, they've qualified for a retirement plan. The German pension system refers to this as a five-year "waiting period." It's important to note that an application is required for these pension points to be considered – it's called the account clarification.
- Sharing the Load: Co-Parenting and Pension Points: Parents can divide the waiting period between themselves. It's all about who primarily cares for the child. If both parents work part-time or share responsibilities equally, the pension years can be allocated accordingly. However, parents can only claim child-rearing pension points for one child at a time.
- Staying Eligible: Don't Forget Your Job! Parents can only claim child-rearing pension points as long as neither parent has other claims related to childcare (e.g., civil servants). Once either parent secures employment that requires childcare, the child-rearing pension points will cease.
- Pension Amount: The Impact of Child-Rearing Points: The pension amount for these child-rearing points is calculated based on average earnings. Although it does not generate the same pension amount as full employment with high income, it still adds valuable pension points. Multiple children will increase the total pension points, thus contributing to a higher retirement plan compared to someone without children or work contributions.
When Basic Security Steps In
When you haven't worked enough to live comfortably in retirement or haven't provided an alternative means for your old age, the German pension system offers a safety net – basic security. If you have less than 1062 euros per month, you'll want to have your claim to basic security checked.
Conditions for basic security are similar to those for social benefits known as citizen's allowance. Both benefits can be applied for at the social welfare office in your residence. However, unlike other benefits, basic security can also be applied for at the pension insurance, which will then forward the application to the social welfare office.
In some cases, parents or children may be called upon for maintenance if they earn more than 100,000 euros per year. The state also takes into account any possible income in addition to the applicant's assets. Assets like cash, personal heirlooms, and a house or apartment (if it's reasonable based on the state's contribution) are typically excluded.
Embracing the Future: Planning for Your Golden Years
Despite the challenges in building a retirement plan if you've never worked, there's always room for planning. The German pension system's recognition of child-rearing efforts and the opportunity for parents to earn pension points is a significant step in ensuring that devoted parents can enjoy a comfortable retirement.
In summary, parents who have raised multiple children but never worked can accumulate pension entitlements through credited child-rearing periods. These periods function as contributory periods in the pension calculation, enabling parents to qualify for and receive a retirement plan despite an absence of employment contributions – with the pension amount increasing with the number of children raised [1].
- To ensure a comfortable retirement, non-worker parents in Germany can utilize the opportunity for vocational training to supplement their income, specifically in the fields of wealth-management, personal-finance, or even vocational training training itself.
- In addition to the pension credits earned from child-rearing, these skills can add to the overall wealth-management plan, increasing the retirement plan beyond what traditional pension credits would provide.
