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Double living costs for tenants in old age
Double living costs for tenants in old age
Video: Double living costs for tenants in old age
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The majority of Germans are convinced that their own home is the best pension scheme. In fact, a recent study shows that tenants have to pay twice as much as their owners to live in old age.

Table of contents Table of contents Study: Tenants pay more in old age

  • What is the most popular form of prevention?
  • Residential Riester as an attractive pension
  • Residential Riester: The most important questions and answers

Table of contents Table of contents Study: Tenants pay more in old age

  • What is the most popular form of prevention?
  • Residential Riester as an attractive pension
  • Residential Riester: The most important questions and answers

What is the most popular form of prevention?

What is the best way to plan for retirement? Clearly, your own home. Two thirds of Germans agree on this - this was the result of a current and representative survey by Kantar TNS (among others on behalf of the state building societies). According to this, owner-occupied residential property as the best form of provision is much more popular than private pension or life insurance, which only receives 28 percent approval. With good reason: If you choose to own your own home, you will enjoy your old-age provision from the day you move into your own four walls - usually long before you retire. And later, as soon as a house or apartment is debt-free, the housing costs for property owners are reduced significantly.

The German Institute for Economic Research (DIW) has calculated how much freedom from rent makes in old age: According to this, retired tenants had to spend an average of 35 percent of their net household income on housing costs in 2016. According to DIW weekly report 27/2019, it was only 15 percent for owners. In the past 20 years, the housing costs for tenants have also increased significantly more than for owners.

Wohnkosten im Alter
Wohnkosten im Alter

Photo: LBS MfW 2019 / empirica

Residential Riester as an attractive pension

According to a recent survey by Deutsche Rentenversicherung, the proportion of respondents who consider residential Riester to be an attractive pension has increased from 25 to 31 percent since 2014. This makes home ownership the most popular form of provision among Riester products.

This is also underscored by a look at the current statistics of the Federal Ministry of Labor and Social Affairs (BMAS) on private pensions: In recent years, the home pension as the only Riester product has seen growth in addition to investment fund contracts. There are currently over 1.8 million existing residential Riester contracts in Germany.

What is residential Riester?

With the residential Riester grant, the state supports the acquisition, construction or age-appropriate renovation of a property used by the owner. Because that is "retirement savings you can touch". Unlike other pension products, owners can enjoy their own four walls long before they reach retirement age - namely from the day they move in. Financially, rent-free living pays off, especially in old age. Another study shows how much homeowners save in old age. The Federal Statistical Office estimates the relief for pensioners with debt-free home ownership on average between a quarter and a fifth of their pension.

"Riester Bausparen pays attention to two common needs - the desire for your own property and for a secure pension, " explains Joachim Klein from LBS. In addition, homeowners enjoy the security that their home offers them for the future, because unlike tenants, they do not have to worry about rising rents or even termination. "In conjunction with building society savings, Wohn-Riester is paving the way for many people into their own four walls, " says Klein. The Riester-certified home savings contract is the only product where savers receive bonuses in both the savings and loan phases. In the saving phase they increase equity and during financing they flow directly into the repayment of the home loan.

Bausparer sparen mehr Geld
Bausparer sparen mehr Geld

Home savers save an average of 17 percent more money than households without a home savings contract. In addition, home savers who purchase property are on average two years younger than non-home savers.

Photo: iStock / 3283197d_273

Residential Riester: The most important questions and answers

LBS expert Joachim Klein explains who gets residential Riester and what a Riester building society contract can be used for.

Who can take advantage of residential Riester?

All employees who are covered by statutory pension insurance are directly eligible. Officials, professional soldiers or the self-employed, provided they pay into the statutory pension insurance, are also entitled to the living Riester allowances. There are no income limits.

How much must be paid into a residential Riester contract each year in order to receive the maximum funding?

For the full allowance, savers who are eligible for support must pay at least four percent of their social security-related income from the previous year into the contract, up to a maximum of 2, 100 euros, less the government allowances. Even those who are not directly entitled to the subsidy - such as, for example, all who are not legally insured under a pension - can conclude their own residential Riester contract if the spouse is eligible for subsidy. To receive the full allowance, an annual minimum contribution of 60 euros is then sufficient.

What can savers use the Riester-funded building society contract for?

With a Riester-funded building society contract, savers can finance a property they use themselves. In addition, you can use the Bauspar contract for these purposes: rescheduling an existing building loan or financing a renovation that is suitable for the elderly or disabled.

What is the housing grant account?

All subsidized savings and repayments are noted on the fictitious housing subsidy account and interest is paid at two percent per year until the start of the pension. Upon retirement, this sum must then be taxed at the applicable tax rate. The advantage of this so-called downstream taxation: the income and thus the tax rate for retirement are generally lower than during professional life. Residential Riester savers can decide for themselves how they want to pay the tax: either in equal installments up to the age of 85 or the total in one go. In this case, only 70 percent of the subsidized contributions have to be taxed.

When the entitlement to allowances changes

If you would like to benefit from the full funding of the living giant, you should regularly check the personal information and notify the provider of changes. If, for example, the marital status or income changes, this can affect the amount of the allowance. Riester savers receive these allowances a maximum of per year:

  • 175 euros basic allowance,
  • 300 euros for children born after 2008 (185 euros for those born before 2008),
  • 200 euro one-time starter bonus for savers under 25 years of age,

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