Everyone who lives in Germany will have to deal with the German pension system sooner or later. And when it does, you will find out relatively quickly that the income gap between the two stages of life will be simply enormous. Around 10% of the German population must expect a pension of less than €1,300.00/month. Before deducting health and long-term care insurance. Many try over the years to improve their pension situation through private pension insurance, company pension plans, capital-forming benefits, and so on, which is basically good and necessary, but far from sufficient. This is partly due to the fact that the contributions paid are not/ or may not invested in an asset and the money therefore does not multiply or only to a small extent due to the low interest rates. But these interest rates are so low that they will not cover inflation. In other words, the purchasing power of the paid-in capital will lose considerable value over time. We do not even want to talk about savings books and accounts at this point.
In addition, there is the extremely unfavorable ratio between pension payers, i.e. employees, and pensioners. This is a problem because the German pension system is based on the so-called pay-as-you-go system. This means that the pension fund is predominantly financed by the pension contributions of employees. We believe that a pension reduction will be inevitable over the years. Unless, that is, a significant change in the system is dared, which is unthinkable at the moment, especially given the opinion of the new Chancellor on the subject. Another disadvantage of this pay-as-you-go system is that the contributions paid in are not invested and thus no added value is generated.
In addition, pensions in Germany are capped. This means that no matter how much you have paid in and for how long, you will not be able to exceed a certain limit after retirement, the socalled assessment ceiling. In 2020, this was €6,900.00/month in the West and €6,450.00/month in the East.
From the points mentioned above it becomes clear that one must be active to the own age precaution. Otherwise the nightmare of each employee threatens many of us, age poverty.
In contrast, by investing one has almost unlimited possibilities to secure a reasonable income in old age, and beyond.
