For me, retirement in Germany makes sense (which should come as no surprise given that I’m German). The essay will outline everything needed to get started.
Germany has a low cost of living when compared to other European countries. According to 2020 data, one will need about €853 (approximately $957) to meet their living requirements in Germany. Food, utilities, clothing, and entertainment prices are all on par with EU averages, while monthly rent is among Germany’s most significant financial outlays.
To retire in Germany you need $750,000 in your retirement fund. This gives you a comfortable lifestyle and a budget of $2,500 per month. The minimum is $540,000 – giving you a budget of $1,800 per month.
This question now requires a comprehensive response. After all, one doesn’t decide to retire without giving it much thought.
PS: Please note that the article does not contain any exclusive financial advice. Make a personal investigation. I am NOT a financial advisor, and this article is just my opinion on the subject.
Let’s get down to business and crunch some statistics!
How Much Money to Retire Comfortably in Germany?
One of the most crucial elements to consider when developing retirement plans, any financial expert will tell clients, is the living costs.
The amount of money required to live in Germany, as with any nation, will vary depending on what city a person chooses. Numbeo, a website that aggregates citizen price data, says that the typical German monthly budget (excluding rent), covering food, bills, commuting, and entertainment, would be roughly $957.
In addition, they say that rental costs in Germany are 31.09% below those in the United States.
In cities like Munich, a one-bedroom flat downtown may run as much as $1260 per month, while Leipzig offers apartments for as little as $590. In the United States, one-bedroom apartments in New York City may easily cost $3,000 per month, whereas an equivalent unit in Albuquerque, New Mexico, may cost $830.
Health insurance is a requirement for all German permanent residents. Most citizens have coverage through Statutory Health Insurance (SHI) providers, often referred to as sickness funds, funded by the government.
Preventive treatments, inpatient and outpatient hospitalization, medical services, psychiatric care, physical therapy, dental care, optometry, prescription medications, and hospice/palliative care are all covered under the SHI.
Co-pays for prescription medications and medical equipment are usually $6 to $13 under SHI plans. An inpatient hospital stay usually lasts 28 days, and the copayment is usually approximately $11.50 per day.
More than 100,000 SHI-certified physicians practice ambulatory care in Germany. General practitioners, internists, and pediatrics account for around half of the total. The remaining half has experts in its ranks.
According to a set price schedule, these doctors get paid for their services on a fee-for-service basis. The pricing structure is a negotiation between physicians and SHI insurance.
If one’s income exceeds $71,564, they can choose not to be covered by SHI and obtain private coverage. IN Germany, 11% of people chose this path.
Housing Costs For Retiering In Germany
During retirement, property ownership in Germany is not as common as it is in the United States.
As per the latest data, only 51.4 percent of Germans owned property in 2017, one of the lowest rates in Europe and significantly behind the 64.4 percent in the United States.
To buy a house, one needs to get clearance and show the lender one’s intention of staying in Germany for the long run.
Also, expect to spend a deposit of more than 20%, given that some banks and realtors perceive foreigners as riskier purchasers than locals.
Extra expenses can be expected, such as registration fees, property sale tax, and estate agent fees. These costs might amount to about 10% purchase price of the home.
Due to the challenges associated with property ownership, one may want to consider renting in Germany. The main thing to keep in mind while searching for a place to rent in Germany is that most flats lack amenities such as freezers and dishwashers. Those will almost certainly have to be purchased individually.
Summers don’t require air conditioning, but winters will necessitate heating. Germany’s weather is entirely consistent across cities. In the summer, temperatures will reach 70F and will dip to the upper 20s during the winter.
Retiree Taxes In Germany
The specifics regarding taxation in Germany are a determination of a variety of factors unique to everyone. However, there are a few basic standards for which one may prepare ahead of time.
First and foremost, one will be required to file income taxes in Germany. If they earn more than $10,263 but less than $62,666, they’ll pay a 14 percent tax rate.
Taxes will be significantly higher at a rate of 42 percent if the income exceeds $62,666.
Any income over $297,119 is subject to a tax rate of 45 percent.
The tax year in Germany runs from January 1 through December 31. In Germany, the expected date for filing taxes is May 31.
What You Need to Retire Comfortably In Germany:
To retire in Germany, living a comfortable lifestyle, you need a retirement fund of $750,000 or more, depending on where you decide to live. This gives you a budget of $2,500 per month while sticking to the famous 4% rule of not taking out more than 4% of your fund each year.
However, not all of us are going to save up $750,000…
Suggested reading: Is Saving $1,000 a month good?
The Minimum Amount to Retire in Germany
Germany’s lowest costs of living vary greatly depending on the lifestyle and where someone chooses to reside. According to Numbeo, a single individual in Berlin would require a minimum of €726 ($865) per month to live decently.
Berlin is affordable compared with most of Germany’s major cities, so to rent a property or retire there, one has a decent hope of finding inexpensive alternatives for basics like a rental home.
Of course, one may decide to buy a home in Germany, drastically reducing the daily expenditures over time.
In Munich, a single individual would need a minimum of €788 ($900) per month to live (without rent); however, there are alternative locations for those on a tight budget.
As far as the cost of living is concerned, several other smaller cities are substantially more affordable. For example, in Dresden, an income of over €660 ($750) should suffice, whereas in Leipzig, roughly €700 ($790) should be enough (without rent).
This helps us draw the conclusion:
The minimum amount of money you need to retire in Germany is $540,000. This gives you a budget of $1,800 per month, and a decent lifestyle.
Is Retiring in Germany a Good Idea?
Retirement in Germany may not appear to be the logical decision for many, but there are several benefits to selecting this country as a retirement destination.
In terms of financial preparation, there is no need for concern about moving during retirement. Financial advisers will make the transition as smooth as possible while ensuring that any pension money, savings, and assets grow.
Listed below are some reasons for considering moving to Germany and making it a new place for retirement:
Traveling through Europe
Germany is an excellent starting place for exploring Europe. Switzerland, Denmark, France, Austria, Belgium, and the Netherlands via ICE trains. Users only need a passport to go on their next journey.
Everyone’s perspective is different, of course. If someone is relocating from the United Kingdom, Germany is likely to be a cheaper option. According to recent surveys, Germany is considerably more affordable than the United Kingdom in every category, including dining out, renting, and groceries.
Some retirees prefer a tropical climate. For those who are searching for that, Germany might not be the best choice. Germany, on the other hand, may be the best place to see all four seasons. A lovely spring and mild summer await visitors in Germany, followed by a colorful fall and even snowfall in winter.
Germany’s low crime rate and political stability are only two of the numerous reasons the country constantly ranks among the best globally in terms of quality of life. In fact, according to a recent analysis of worldwide cities, Germany has four of the sixteen finest places globally to live in, including Frankfurt, and Berlin.
Residency Requirements Are Simple
When planning to retire to another nation, one of the main worries may be the ease of getting a residence. When coming from within the EU and fulfilling two standards, getting a job in Germany is not too strenuous. First and foremost, one must have health coverage by health insurance. Secondly, must demonstrate financial security, which a pension or other financial assets may prove.
Access To Health Insurance Is Simple
If someone decides to retire in Germany, this will most likely be a significant problem regarding health insurance. There are several private health insurance options available to foreigners in Germany. A fast search on the internet will yield a variety of results.
According to the country of origin, one may also be able to access national health care. For example, the federal health program for retirees in Germany is open to people with British state pensions.
There Is No Speed Restriction
For car enthusiasts, Germany might be a good fit… They’ll get immediate access to Germany’s renowned automobile sector, as well as the ability to drive them at any speed. Many German roadways have no speed limits, providing the ideal opportunity to unleash the inner F1 driver.
The Food Is Delicious
For lovers of beer, pretzels, and sweets? In this case, retiring in Germany would be the best choice. There will be a tavern nearby serving traditional German fare with a giant stein of beer wherever one ends up in Germany.
Germany has a lot to offer retirees wishing to spend their golden years abroad. It will allow them to use developed-country resources without having to spend a fortune for them. While it may not have gorgeous beaches or a clear sky, Germany might be the ideal location anyways.