Baby boomer boom: Millions retire early - the consequences!

Baby boomer boom: Millions retire early - the consequences!

In Germany we are facing a fundamental change in the pension system, which is already showing its first effects. Loud np-coburg.de Almost half of the baby boomers who have now reached retirement age have taken early retirement. A total of 1.8 million people from these age groups will have dared to retire by 2023. The statistical look shows that a whopping 44 percent of these baby boomers and more than 55 percent of new retirees have chosen early retirement.

From 2025 onwards, it is expected that at least one million of them will reach retirement age before reaching the standard retirement age. Although the retirement age is rising to 67, this does not change the actual age at which many retire. Those who have been insured for a long time can benefit from an early pension without deductions if they can look back on an impressive 45 years of insurance.

The challenges for pension funds

But what does that mean for pension insurance? Even though pension funds are coming under massive pressure due to the baby boomer wave, there are bright spots. The age structure of the population is changing and this challenge is seen by experts as solvable. The IW study shows that pension funds are confronted with spending billions, while at the same time the number of people paying in is falling. By 2045, pension spending could grow to over 700 billion euros.

Current developments show that the old-age dependency ratio, i.e. the ratio of people of retirement age to 100 employed people, is increasing rather moderately. From 2020 to 2040, an increase from 34.9 pensioners to 43.4 pensioners per 100 employed people is forecast. This is not unprecedented relative to past increases rentenupdate.drv-bund.de represents.

Political measures and a look into the future

To meet these challenges, Chancellor Friedrich Merz has announced a “Pension Reform Commission” that is expected to deliver practical results by the middle of the legislative period. Political measures such as the planned “active pension” of the SPD and the Union, which provides for tax-free salaries for older employees, show that there is a desire to keep the baby boomers in their working lives for longer.

Another interesting aspect: early retirement is often taken advantage of by men and well-educated specialists, while people in lower wage groups are often economically forced to continue their activities. This inequality is another issue that the Pension Commission should discuss, as IW researcher Ruth Maria Student calls for.

It remains exciting to see how these developments will develop in the next few years and whether the political measures will actually take effect. One thing is certain: demographic change will put Germany's pension system to the test in many ways, and it is up to politicians to show a good hand in overcoming the challenges.