Leaving Germany in retirement

Do you dream of moving to the sun in your old age and enjoying a relaxed lifestyle? Panama, Thailand or Portugal have always been attractive destinations for you? – Then rejoice, because in principle you can have your German pension transferred abroad.

Emigrating as a pensioner can be a great way to fulfill a dream. However, there are a few things to consider before taking this step. In this blog post, we will look at the most important aspects of emigrating as a retiree, from the most popular destinations to the opportunities retirees have abroad and the challenges you may face. Let’s find out together if emigrating in retirement is right for you.

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Why do many retired people in Germany think about relocating?

Why do many German retirees and pensioners think about going abroad? Some of the most common reasons are the need for adventure and variety, the search for a more pleasant climate, the opportunity to enjoy a higher standard of living with less money and the chance to get to know the culture and people of other countries.

The number of pensioners transferring their pension abroad is increasing. In 2020, there will be around 248,000 pensioners, according to the pension atlas published by Deutsche Rentenversicherung. This is a new record figure – an increase of around 20 percent compared to 2010.

Since the pandemic, rising inflation and recession, the war in Ukraine and the like, even more people of all ages are thinking about emigrating. What are the most popular destination countries and the most common reasons for German emigrants? We have summarized them for you in this article: Reasons why people leave Germany.

We have also written a blog post on the topic of “Where to move: The most expat friendly countries in 2024“.

In the following section, I will focus specifically on why pensioners leave Germany to spend their retirement abroad.

Climate and weather

Many people want to move to a country where the climate is milder and more stable than in Germany. Countries such as Spain, Portugal or Thailand are popular destinations for retirees who want to enjoy warm weather all year round. A warmer climate can help you feel more comfortable and content, and improve your health and age-related ailments through outdoor activities and more vitamin D. A warm and sunny place offers more opportunities for outdoor activities such as hiking, swimming, playing golf and much more. Compared to Germany, there are more leisure opportunities all year round in more southern countries.

Cost of living

The cost of living plays an important role when moving abroad, as many pensioners are dependent on a limited income in old age. In a country with a lower cost of living, you can continue to lead a comfortable lifestyle and perhaps even afford a bigger house or a better car. The cost of food, clothing, entertainment and medical care can also be lower, which contributes to the fact that more and more German seniors are opting for a new home abroad.

Social and cultural aspects

Some retirees want to settle in a country whose culture and lifestyle is more appealing to them. They are looking for new experiences and adventures in retirement and want to spend their free time discovering a new country.

Moving to another country allows them to get to know a new culture, make new friends and integrate into a different society. Some people also want to improve their language skills or learn a new language, which is easier in another country than in Germany. Perhaps you are looking for a community of people who have similar interests and are at a similar stage of life, e.g. a community of retirees or expats who support each other and do activities together?

Security and health care abroad

As many age-related complaints also occur with age, the health aspect is one of the most important. In countries with a constant and warm climate, the flu epidemics triggered by the fall and winter weather are less pronounced. There are also countries where healthcare is better than in Germany. Some countries that are known for their good healthcare are, for example

• USA (although costs are higher than in Germany)
• Canada
• Australia
• New Zealand
• Singapore
• Japan
• South Korea
• Taiwan
• Norway
• Sweden
• Finland
• The Netherlands
• Belgium
• Switzerland
• France

Another important issue when emigrating at retirement age is security. It is advisable to find out about the current political and criminal situation in the destination country and seek expert advice if necessary. In some countries, natural disasters such as hurricanes, earthquakes or floods occur more frequently and it is important to consider these risks in advance. It is also important to find out about the safety conditions in the region where you plan to live and the availability of emergency services and medical care.

What happens to my pension if I leave Germany?

If you’re thinking about spending your retirement abroad, there are a few things you need to consider. First of all, you need to decide which country you want to go to. The German pension insurance gives you a free choice here, as it pays pensions worldwide.

Germany has concluded social security agreements with many countries, which means that as a German pensioner you can continue to receive your money from Germany. If you want to emigrate to a country that does not have a social security agreement with Germany, this does not mean that you cannot receive your pension. There is just no general regulation on the recognition of pension entitlements. If you move to such a country, you should find out about the conditions for pension payments beforehand.

The following overviews show all the countries with which Germany has concluded a social security agreement. These are the European Economic Area on the one hand and other countries such as Australia and the USA on the other. (see Figure 2)

The contracting states you see at the bottom of the chart are all the countries that are not part of the European Economic Area but have a social security agreement with Germany. You can also have your pension contributions paid out in these countries:

Pension refund Germany: Who is eligible?

The German statutory pension system is not known for readily refunding contributions. To be eligible for a refund, certain requirements must be met.

The aim of the German pension system is to encourage individuals to remain insured until retirement age so that the system can manage pension payments on a sustainable basis. However, this means that individuals who choose to take a payout before retirement age will not have access to future retirement benefits. It is important to note that certain aspects of the refund process can be lengthy, complex and confusing. Nevertheless, this rigorous approach ensures high standards of security and safeguards the substantial funds involved in the pension system.

Generally, only three groups of people can qualify for a pension refund:

• civil servants and those similar to them,
• those who have reached the standard retirement age but do not meet the general waiting period, and
• foreigners who have worked in Germany and have since emigrated. However, even within these groups, specific requirements must be met to be eligible for a refund.

The German pension system allows for early payment of contributions if the following three basic requirements are met:

• You are no longer required to pay contributions in Germany
• Your last contribution payment was made at least 24 months ago
• You do not have the option of paying into the German pension insurance scheme voluntarily.

Your ability to make voluntary pension contributions depends on your nationality and current place of residence. The German pension insurance system divides potentially eligible individuals into four groups:

• German nationals,
• Nationals of EEA countries, Switzerland and the United Kingdom,
• Nationals of treaty countries and
• Nationals of non-treaty countries.

Retiring abroad: All you need to know!

Even if German pension insurance gives you a free hand, your choice of pension country will affect the amount of your state pension. If you live outside the euro zone, you will have to expect conversion fees and exchange rate losses . There may also be charges for transfers abroad. You should therefore consider carefully whether it makes more sense to transfer your pension to a German account that you can also use abroad. However, if you want to open an account in Germany, the banks usually require you to be resident in Germany. It is therefore advisable to open an account in Germany before you move.

It is important that you inform the pension and health insurance companies at least three months before your move and provide your new address, contact details and bank details. It is also advisable to find out in advance about the possibilities of a bank account in the country of your choice, especially the associated costs and fees.

It is also important to know that most pensions are paid abroad to countries in the European Union such as Spain, France and Switzerland. These countries all have a double taxation agreement with Germany, which is decisive for the amount of tax on your pension. It is important to find out about the tax implications in your destination country before you move and ensure that you can meet your tax obligations.

What is a double taxation treatment for pensions?

A double taxation agreement (DTA) is an agreement between two countries that regulates the taxation of income and assets in order to prevent a person from being taxed on the same income or assets both in their home country and abroad.

Whether Germany is allowed to tax your pension depends on which country you now live in. If there is an agreement between your country of residence and Germany to avoid double taxation (so-called double taxation agreement), Germany may not be allowed to tax your pension. In this case, the tax rate of your new country of residence will apply.

If both countries have a right of taxation, the double taxation agreement also regulates how your country of residence can avoid double taxation. Depending on the double taxation agreement, there are two ways to avoid double taxation: Either the German pension is tax-free in your country of residence or your country of residence must offset the German tax against the tax payable abroad.

Which countries do retired people prefer to relocate to?

Germans of all ages often emigrate for financial reasons. Many pensioners move abroad in their old age because the cost of living is lower there and they want to spend their “free years” where others go on vacation. An important factor is that average pensions in Germany are often insufficient to cover the rising cost of living.

According to the Stuttgarter Zeitung newspaper, the average pension in the old federal states is €1,620.90 gross and in the new federal states €1,598.40 gross (as of July 2022), which after deducting taxes and social security contributions only results in a net amount of just over €1,400 per month. Many people see this as an incentive to move abroad in order to extend their pension and improve their quality of life at the same time.

This is a challenging question, as each emigrant leaves Germany for different reasons.

These are some of the most popular countries for German retirees:

Several countries within Europe are ideal for a relaxed retirement:

• Emigrating to Portugal: This European country has become increasingly popular in recent years as it offers a high quality of life at an affordable price. Rents and property prices are comparatively low, and there are also good deals on food and services.
• Emigrating to Spain: Especially the regions in the south and inland of Spain, offer great opportunities to enjoy life in retirement, as the cost of living is lower than in many other parts of Europe.
• Emigrating to Austria: Our neighboring country is another popular country for retirees from Germany. The proximity to Germany, the similar culture and the good quality of life are some of the reasons.

Here is an article from Focus Online on pension taxation abroad: Tax havens put to the test: These are the cheapest places to retire abroad.

Where can you live on €500 a month?

There are countries where you can live well on a monthly budget of €500 – €1000. However, this depends on the standard of living you are aiming for and the lifestyle you want to lead. Countries where you can live particularly cheaply can be recognized by the fact that the average monthly wage of the locals is also very low. In Bulgaria, for example, the average wage is around €400 – €500 per month. The same applies to Thailand, for example, with a similarly high or low average wage.

In the following countries, you can therefore live on a very low income or a small pension:

• Countries such as Mexico, Thailand, India, Vietnam, Philippines, and other Asian countries generally have a very low cost of living
• In European countries such as Bulgaria, Romania, the Czech Republic, Poland and other countries in Eastern Europe, you can also live on a very low budget.
• In some countries in South America, such as Ecuador, Peru or Bolivia, this is also possible.

How is my German pension taxed when I live abroad?

The taxation of your pension depends on how long you stay abroad. If you stay abroad for no longer than six months a year, it is a temporary stay abroad and your pension will continue to be paid as usual. In this case, nothing will change for you in terms of tax; you will continue to be subject to unlimited tax liability in Germany on all your income, including your statutory pension.

However, if you spend more than six months a year abroad, this is considered a permanent stay abroad. You then have limited tax liability in Germany, there is no basic tax-free allowance and your taxable income is taxed from the first euro. Numerous benefits such as spousal splitting and extraordinary expenses are no longer taken into account in this case. The tax-free allowances for children and single parents will also no longer apply.

Without these benefits, the tax burden on taxable income in Germany can be very high. It is important to find out about the effects of permanent residence abroad on the taxation of pensions before moving abroad.

Conclusion: Advantages of retirement emigration

Retirement emigration offers many benefits for people who want to spend their retirement in a different environment. Key benefits include the opportunity to start a new adventure, savings from a lower cost of living abroad, the chance to enjoy a pleasant climate all year round and the opportunity to experience a new culture.

Many countries also offer excellent medical care, allowing retirees to retire healthy and happy. Avoiding double taxation of pensions through double taxation agreements can also be a major advantage. Emigrating in retirement is a promising way to enrich your life in old age and discover the world. Take control of your life and listen to your gut feeling!

We are happy to assist you with any questions about relocating and deregistering in Germany! ☀️

Your Deregistration.de team.