The coverage gap – what is it anyway?

Building a modern barrier-free house, buying a new car or using the free time to travel to special places – everyone has individual ideas, dreams and wishes for their time after their working life. In order to fulfill them, however, the necessary financial means must be available. In any case, very few people want to have to do without something and at least maintain their current standard of living. As a rule, however, the statutory pension is almost always significantly lower than the financial needs at retirement age.

The coverage gap - what is it anyway?

Supply gap – How to calculate it?

The pension gap is the difference that arises when you subtract your actual available income in retirement age from your financial needs. For most people this turns out negatively and they cannot maintain their standard of living.

To avoid having to accept financial losses in old age, you should determine in good time before you reach retirement age how high your personal pension needs are. For this purpose, you should generally include the following costs in your bill:

  • Household money
  • Expenses for insurance
  • Rent expenses
  • Housing expenses
  • Renovation costs for house or apartment
  • Any loan installments
  • Expenses for personal requirements, for example a new car, travel or hobbies

To roughly estimate utility needs in advance, experts recommend using a guideline of 90 percent of the most recent net income.

As part of your pension provision, 1822direkt offers you various options for securing your financial future in good time. This allows you to close the pension gap, you do not have to do without anything in retirement and you can maintain your current standard of living.

To calculate the pension gap, you need two values in each case:

  • The sum of your expenses at retirement age
  • Your income during retirement

Your disposable income includes the statutory pension. Information on the amount of this

amount will be paid to the corresponding insurance carrier. You will also receive annual pension information from the German Pension Insurance, from which you can see the corresponding amount that you will receive from the statutory pension. However, take into account that this information corresponds to a forecast. Changes to the amount may result, for example, from child-rearing periods or unemployment.

If your employer has taken out a company pension plan for you, you can obtain information about the amount directly from the employer. You can also add this amount to your retirement income.

Other income could possibly be rental income, income from leasing, capital assets or a life insurance policy.

Example for the calculation of the pension gap

A general formula for calculating the pension gap is as follows:

Pension gap = pension requirement – income

If your last net income exceeds 2.If your retirement income amounted to EUR 000 and it is assumed that you will need 90 percent of this amount from the time you retire, this would correspond to an amount of 1.800 euros. In the case of a monthly statutory pension of 1.300 euros without other income, there would be a pension gap of 500 euros according to today's value. You would have to cover this with other income in order to roughly maintain your standard of living and thus close the pension gap.

Various calculators, such as those from Stiftung Warentest, offer you the option of calculating the pension gap conveniently online. You can also take into account your current pension level and a possible inflation rate.

Closing the pension gap – how does it work??

The pension gap resulting from the difference provides information on the extent to which you now need additional financial security in order to be able to maintain your accustomed "standard of living" at retirement age. There are various ways to close the pension gap:

  • Taking out additional pension plans that are subsidized by the state. These include the Riester and Rurup pensions.
  • A company pension plan (baV), which your employer takes out for you. If you do not yet have such a pension plan, ask your employer about it, as he is legally obliged to offer you one.
  • An additional private pension plan. In the case of such a pension, you pay a monthly contribution during your working life. The pension insurance carrier then grants you a guaranteed pension for life. In concrete terms, this means that when you retire, you have the choice between a one-time payment of the sum you have saved or a monthly payment of your pension.

As part of your retirement planning, 1822direkt offers you various options for securing your financial security in good time. This will enable you to close the pension gap, not have to do without anything in retirement and maintain your current standard of living.

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