Bertelsmann Study: Abolishing "Rente mit 63" Could Save Billions

The regulation, introduced in 2014 by the then-grand coalition government (CDU/CSU and SPD), allows employees to retire two years before the regular retirement age without deductions after at least 45 years of contributions. Currently, the regular retirement age is 66 years and four months, meaning that early retirement without deductions is effectively only possible from the age of 64 years and four months. This makes it, in effect, a "Rente mit 64 1/3".

Who Uses Early Retirement?

According to the Bertelsmann Stiftung, approximately 250,000 to 280,000 employed individuals newly utilize this option each year. This corresponds to about 30 percent of all individuals retiring. Overall, "Rente mit 63" accounts for about one-fifth of the total expenditures of the statutory pension insurance, with an increasing trend, according to the study.

In a model calculation for the birth cohort of 1957 – the currently youngest cohort that is fully retired – the researchers calculate a relief for the statutory pension insurance of around 10.4 billion euros. After deducting lower revenues from health, long-term care, and unemployment insurance, as well as income tax, amounting to approximately 860 to 900 million euros, a net relief for the state treasury of around 9.5 billion euros per retirement cohort would remain.

Financial Effects of Abolition

The authors emphasize that this effect would not be a one-time occurrence but could be replicated on a comparable scale for subsequent cohorts. For contributors, according to the study, this could mean a relief of around eight billion euros in 2025, as an earlier calculation by the Prognos Institute on behalf of the Initiative Neue Soziale Marktwirtschaft (INSM) had already shown.

In addition to the financial aspect, the study points to labor market policy consequences. If early retirement were to be abolished, an estimated 125,000 additional full-time workers would be available to the German labor market. Affected individuals would, on average, work about ten months longer. "It burdens the pension fund, and at the same time, competence, expertise, and labor are prematurely lost to the economy," said Schleiter.

Impact on the Labor Market

His colleague Eric Thode added: "The benefit that arises when experienced, highly qualified employees are kept in their jobs for a few months or even years longer is far greater." Early retirement is not only used by employees in physically demanding professions but primarily by individuals with long, stable employment histories and above-average pension claims.

From the birth cohort of 1964 onwards, the earliest possible access age for early retirement is 65 years. Individuals born before 1953 could still retire at 63 without deductions. For the birth cohorts between 1953 and 1963, the age limit increases gradually, in parallel with the increase in the regular retirement age.

Authors' Proposal: Exceptions Instead of a Blanket Solution

However, the study authors reject a blanket abolition. They warn that a complete elimination would disproportionately affect individuals with reduced earning capacity. Instead, they propose differentiated exceptions. These include individual health assessments, a redesigned reduced earning capacity pension, and consideration of income. According to the authors, an income threshold of 60 percent of the average earned income could be a prerequisite for special pension arrangements.

At the same time, the study recommends investing more in further training and healthy working conditions to enable more people to remain in their professions longer. "The state is costing itself many billions of euros every year for the 'Rente mit 63' option," Schleiter affirmed.

The issue is already on the political agenda. The current coalition of SPD and CDU/CSU plans to present a reform package with pension policy decisions shortly. The Bertelsmann study now provides empirical material for this. As early as 2023, a study by Prognos on behalf of INSM had shown that an end to retirement at 63 could alleviate the shortage of skilled workers and significantly relieve contributors.

Political Context

The study thus joins a series of proposals aimed at adapting the German pension system to demographic developments. While some are calling for a later retirement age, social welfare organizations and trade unions warn against further burdening employees who are already working long hours. The Bertelsmann study attempts to show a middle ground: not a complete cancellation, but a fundamental reform with targeted exceptions.

For the Bertelsmann Stiftung and DIW, early retirement is a prime example of a politically popular but financially and labor market-wise problematic special regulation. Whether politicians will take up the recommendations remains to be seen. What is clear is that with every generation of retirees who take advantage of the offer, the financial pressure on the statutory pension insurance grows.

The coming weeks are likely to show whether the coalition will include the reform proposal in its upcoming pension decisions. Until then, the rule is: those who can show 45 years of contributions can still retire two years before the regular retirement age without deductions – provided they have reached the corresponding age.

The Bertelsmann Stiftung is one of the largest operational foundations in Germany. The German Institute for Economic Research (DIW) is one of the leading economic research institutes in the country. Both institutions regularly publish studies on social and labor market policy.