Extra income in retirement How much can you earn in retirement?

To afford big purchases, more and more pensioners are continuing to work and receive additional income on top of their pension. But it's important to respect the limits on additional income.

The good news: Yes, retirees can work part-time. If you haven't yet reached statutory retirement age, you'll need to declare your employment to your statutory pension insurance provider. Regardless of your age, you'll have to pay tax on your income, unless it's minimum wage work and your total income, including your pension, is greater than the tax-free threshold.

From July 1, 2017, additional income from pensions is regulated much more flexibly than before. With the introduction of so-called flexible pensions, the fixed limit on additional income has been removed. Instead, pensioners before reaching retirement age can receive an additional €6,300 per year without making any contributions. If their income exceeds this amount, 40% of that amount is credited to their pension. This also applies to disability pensions.

Gone are the previous strict partial pension levels and income limits: Under the new rules, pensioners can set their own partial pension amount from the start. This amount must be at least 10% of the total pension. At the same time, individual limits for supplementary income are also derived from this. The pension insurer will provide you with information about the different options for handling partial pensions and additional income.

Do I have to pay taxes on my supplementary income?

Anyone earning more than €450 per month is compulsorily covered by social insurance and must pay taxes on their income if their total income (pension and supplementary income) is above the tax-free threshold.

If you have reached the legal age and are receiving a pension, there are no restrictions on additional income. If you've reached the statutory age and are currently receiving an old-age pension, then in principle you can earn an unlimited amount of additional income on top of your pension. It won't affect your monthly pension payment, and you don't have to report your employment to your statutory pension insurance provider. However, you may have to pay taxes on your additional income.

Receiving a pension before reaching statutory retirement age

If you retire early, for example at age 63, you'll receive your full pension until your annual additional income reaches €6,300. This limit applies to both old and new federal states. You need to tell your pension insurer about your additional work and income.

What happens if I earn more?

This is very simple. If your additional earnings exceed the legal limit of €6,300 per year, a certain amount will be deducted from your pension, i.e. 40 percent of the amount above €6,300. Depending on how much you earn, you may receive a smaller pension or no pension at all. For example, you receive an old-age pension of €900 per month until you reach the legal age. You also earn an additional €1,400 per month at work, so your annual income is €16,800. After deducting the tax-free minimum of €6,300, you're left with €10,500, which translates to €875 per month. Of this, 40%, or €350, counts as a pension, so you'll only receive a (partial) pension of €550 per month.

Can I make unlimited additional contributions to my pension?

No, because with the Flexible Pension Act, the legislator introduced an individual upper limit for additional earnings: your maximum earnings in the last 15 years before the start of your retirement age count as the so-called additional earnings limit. The calculation points accrued in the current year are multiplied by the monthly coefficient valid in this case. If the reduced pension and additional earnings are greater than this amount, the full 100% of the excess earnings are credited when determining the pension. In the example above, if the individual "additional income limit" is €1,800, your additional income together with your reduced pension (€1,400 + €550 = €1,950) will exceed this amount by €150. Therefore, your already reduced pension will be further reduced by €150 to €400. Good to know: As the monthly coefficient of the pension insurance increases every year, the "additional income limit" can also rise accordingly.