Skipping the Retirement Safety Net: What Happens if You've Never Worked?
- Insight: Basic Security in Germany aids those who are unable to provide for themselves, including those who never held a job or prepared for retirement. Here's the lowdown on this social support system.
The Unemployed and the Aged: No Pension for You!
Income during Retirement without Work: Amount for Those Without Contributions Made - Unemployed Retirement: What's the Amount When Contributions Are Skipped?
Hey there! If you've lived a life without work and haven't prepared for retirement, you're out of luck when it comes to a cozy pension.
There's only one exception for those hardworking parents who raised over one kid – they can get a pension claim since the pension insurance acknowledges child-rearing work too. More on that later.
The state steps in for citizens who can't stand on their own two feet. They receive the citizen's allowance (formerly "unemployment benefit II," often called "Hartz IV"). These benefits are given to employable individuals below retirement age yet unemployed. Those who don't fit this category can apply for basic security.
The Pension for the Unlucky Few: Basic Security
Basic security is like a pension for those who didn't save enough or did nothing for their old age. German Pension Insurance states that if you can't survive on less than €1062 per month, you should check your entitlement to basic security.
The conditions for basic security are similar to those for citizen's allowance, and both benefits are applied through your local social welfare office. In some cases, you can even apply for basic security through the pension insurance – they'll just forward the application. If basic security is granted, it lasts for twelve months, and you need to reapply every year.
Parents and Kids: A Shared Responsibility
The state requires those receiving basic security to exhaust their assets first. Additionally, parents or children earning over €100,000 can be ordered to provide maintenance.
Keep in mind that all sources of income, including maintenance payments, rental income, interest, life insurance, or widow's pensions, affect your basic security claim.
The German Pension Insurance provides a brochure with more details on basic security. Grab it here!
Pension Through Parenting: A Glimmer of Hope
As stated, parents can claim a pension without ever holding a job – the child-rearing periods. One parent gets three pension years for each child (2.5 years if the kid was born before 1992). When a parent has five pension years, they acquire a pension claim, often called the "waiting period." It's essential to note that an application must be submitted – the pension insurance doesn't take care of it automatically.
Those parenting years can only be claimed by one parent each. However, parents can decide to split the "waiting period" among themselves. It depends on who takes care of the child the most. The pension years are valued at nearly the minimum contribution rate. This means the parent has the same pension claim as if they earned the average wage, but even four parenting periods (12 years) may not be enough to secure a pension claim surpassing basic security. The pension insurance pays a maximum of €451 (as of April 2024) to a non-working parent for four children. Learn more here.
- Basic Security
- Child-rearing Periods
- Parenting Pension
- German Pension Insurance
- Retirement Provision
- Pension Claim
- While basic security serves as a retirement plan for those who didn't save enough or engage in vocational training, it is essential to note that a parent can claim a pension without work through the German Pension Insurance by utilizing child-rearing periods.
- Personal-finance and retirement preparation are crucial for long-term security as basic security and child-rearing pension payments may not be sufficient to cover an individual's needs beyond the minimum requirement, necessitating additional resources such as savings, investments, or income from vocational training.
