What does the retirement plan include
Why you should start planning your retirement as early as possible
The topic of old-age provision is on everyone's lips. After all, many people plan their future, everyone wants to grow old and nobody wants to live worryingly in old age. Retirement provision should be started early in order to be able to live carefree after work and at a similar standard of living as before.
Address open questions about old-age provision early on
However, many people do not take the topic seriously and especially at a young age it is difficult to deal with something that is still 30 or 40 years away. Nobody knows what will happen by then or whether he will even get that old. And even now to shrug off money for later, although it could actually be better used now, is difficult for many. Graduates, young professionals or trainees ask themselves all of these questions after completing their training.
But even at an advanced age, questions remain, such as whether the pension will be enough. Someone who maintains a certain standard of living does not want to do without it in old age. Especially when they suddenly have a lot of time again, many people want to travel, pursue hobbies and have a good time. Finally, the "old age" has now begun.
Retirement Provision: A Definition
Retirement provision is a complex system with a simple definition. After all, old-age provision comprises all measures that people take during their lives in order to be financially supported in old age. The focus here is on the standard of living, which can ideally be maintained with the pension.
Pension entitlements or interest from saved assets are the most common pots from which money comes in old age. The pension in Germany is not only limited to the statutory pension insurance system, but is based on a “three-tier system”.
This is how the “three-tier system” of old-age provision works in Germany
- The so-called basic care is part of the first shift. This basic provision includes the statutory pension insurance, i.e. contributions that employers pay to the pension funds.
- The second layer relates to the funded supplementary pension, which includes the company pension plan and the supplementary pension in the public sector. The Riester or Rürup pensions are now also included in the second shift, after they were originally included in private pension provision.
- The third layer includes investment products, i.e. private old-age provision. These include, for example, capital and pension insurance and investments in funds, savings contracts or other capital investments.
Invest in private retirement provision as early as possible
In Germany, not everyone pays into the statutory pension funds for their own pension, but always for the generation that is currently retiring. It could therefore be difficult for people who will only retire in a few decades to be well cared for as their pension coffers are emptier. The reasons for this include demographic change. It must be assumed that the statutory pension only offers basic security and will hardly be sufficient to maintain the accustomed standard of living.
Private pension provision is therefore becoming more and more important and should not be overlooked by anyone. The sooner working people start investing capital and saving money for old age, the better it is. With funds, savings plans, stocks or pension insurance, there are many options that help savers secure their retirement benefits.
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