What type of retirement savings is right for you?
You must have had your ears full of your banker before, about how important it is to have a retirement savings. Still, there are 570,000 adult Danes who do not own any kind of savings at all. It shows a survey conducted in spring 2017.
The retirement age may be far out in the future for you. However, it is still important that you think long-term and ensure yourself a good elderly life without financial obstacles. Therefore, regardless of age, you should decide which retirement savings are right for you.
A few rules of thumb
Before you look at what type of savings will suit you best, there are some things to know. For example, it is said that you must put aside 20% of your current income monthly to maintain your current standard of living.
Maybe you are a student these years and then it can be hard to make right for this rule. Still, of course, it is recommended that you make every effort to put aside as much as you can until one day you can deposit 20% of your monthly salary.
It can also be said as follows: In order to qualify as a pensioner on your own pension savings, you must have saved up so much that during your retirement time you will be paid 80% of your current salary monthly. It is assumed that you are a pensioner for 20 years.
If you need help to see how much your available amount is, then maybe use our 10 tips for budgeting.
Pension scheme according to current income
There are three types of pension schemes: annuity pension, retirement pension and annuity. Which type of retirement savings is right for you depends mainly on your current income. Therefore, remember that the scheme that is best for you now may not be the right retirement savings for you in ten years.
This type of scheme is designed for those who earn more than 500,000 kroner annually. This is because you can deduct your contributions in your top tax with a retirement pension. The annuity pension is paid continuously over a 10 year period. This maximum can be raised to 25 years. Be aware that you are taxed on a retirement pension, as well as a monthly income. You may only pay a maximum of DKK 53,500 annually, which may change from year to year.
This type of pension scheme is aimed at those who earn less than DKK 500,000 annually. Age savings are similar to the now obsolete pension scheme – the capital pension. Unlike the rate savings, there is no deduction for your age savings payments. On the other hand, you also avoid taxes when the money has to be paid out again.
You also choose whether your age savings should be paid on an ongoing basis or over once. At the maximum, you can currently pay DKK 29,600 annually for an old-age savings.
An annuity is typically used as a supplement to a retirement pension. This means that if you want to pay more than DKK 53,500 annually, it may be a good idea to set up an annuity next to your retirement pension. Roughly speaking, an annuity is a type of insurance that ensures that you receive a fixed payment monthly throughout your retirement age.
Thus, with an annuity, you will continue to receive cash, even if the total amount exceeds what you have paid over the years for your pension savings. However, the money will be lost if you lose before you have received everything you have continuously paid.
Major life changes can have a meaning
If your life happens to be a major change, you should always check to see if your pension plan remains the right one for you. A major change in life can have a big impact on your income, and thus on your current standard of living. In that case, it is necessary to adjust your payment into your pension scheme. Life changes where you should change your pension plan payment may be:
- New job
- Marriage / partner
- Joint finances
- Purchase of house, car or other
- Children / bonus children
Start your retirement savings now
We are getting older and older in Denmark before we are allowed to retire. If we, as the elderly, want to work less, then we probably have to pay for our own pocket. In 2006, the retirement age increased from 65 years to 67 years with effect from the year 2027. In 2011, it was decided that the change in the retirement age should already happen from the year 2022.
In 2015, the retirement age changed again, and now it is at 68, with effect from the year 2030. With the government’s 2025 plan, which came to a close last year, however, the retirement age is expected to continue to rise. It is therefore quite uncertain when the current working generation will retire and whether they will.
A pension savings is therefore not just an added bonus, as it used to be. In the future, it will probably be deeply needed for you as an elderly person to get out of the job market and simply enjoy your elderly life.