What the pension gap is
The pension gap is the difference between what you spend in retirement and what comes in after deductions:
Formula
A common rule of thumb puts the need at about 80 % of your last net income. It is more accurate to estimate your own spending; more on that below. Above all, calculate everything in the same currency: today’s euros.
From gross to net pension
The German pension statement (Renteninformation) shows gross amounts. Deducted from them are:
- Health and long-term care insurance: pensioners in public health insurance pay half the general rate (7.3 %), half of their insurer’s additional contribution (2.9 % on average in 2026, i.e. 1.45 %) and the full long-term care rate of 3.6 %, or 4.2 % without children. Together that is about 12.35 %. The privately insured pay their premium themselves and receive a subsidy from the pension insurance.
- Income tax: for people retiring in 2026, 84 % of the pension is taxable; the share rises by half a percentage point a year to 100 % in 2058. Whether tax is actually due depends on other income, such as rent, a company pension or a partner’s income.
With a €2,000 gross pension and no other income, a single person keeps about €1,680 net, around 84 %. With other income the tax is higher.
What you need in retirement
- What falls away: the commute, saving for retirement, often a paid-off loan.
- What comes on top or rises: health, travel and leisure in the first years, possibly care later; maintenance of your own home, or the rent that continues if you rent.
A good starting point is your actual spending over the last twelve months, adjusted for what falls away or comes on top in retirement.
A worked example
A 40-year-old expects a gross pension of €2,000 from 67 according to her pension statement and plans with spending of €3,000 a month, in today’s money.
| Spending in retirement | €3,000 |
| − Net pension (€2,000 gross − 16 %) | €1,680 |
| − Other income | €0 |
| = Pension gap | €1,320 a month |
Pension and other income cover 56 % of spending. For comparison: the standard pension after 45 years on average earnings has been €1,913.40 gross since July 2026; the average old-age pension paid was €1,154 at the end of 2024, after health and care insurance.
With your numbers
Prefilled with the example. The gross pension is on your Renteninformation, which you receive every year once you are 27 and have paid contributions for five years.
Pension gap
€1,320 a month
Pension and other income cover 56 % of your spending.
- Net pension€1,680
- Gap€1,320
Capital that closes it
€453,000
at a 3.5 % withdrawal rate, in today’s €
Saving needed per month
€536
for 27 years; your savings grow to €144,000
Everything in today’s money. Net pension = gross × (1 − insurance and tax). Capital = gap × 12 ÷ withdrawal rate. Not a forecast and not pension advice.
How much capital closes it
€1,320 a month is €15,840 a year. How much capital that takes depends on how much you can withdraw each year without the money running out too soon:
Formula
At 3.5 % that is about €453,000, at 4 % €396,000, at 3 % €528,000, all in today’s money. Which rate is how safe is explained in The 4 % rule. If you plan to use up the capital by a certain age, you need less, but carry the risk of living longer than planned.
Why the start date matters
With €50,000 already saved and a 4 % real return, the 40-year-old needs to save about €536 a month until 67 to reach €453,000. Without savings it would be €787. With the same assumptions, by age today:
| Age today | Saving per month until 67 |
|---|---|
| 30 | €240 |
| 40 | €536 |
| 50 | €1,227 |
Starting ten years earlier more than halves the saving needed; starting ten years later more than doubles it.
Today’s money and inflation
The pension statement uses today’s pension value, without future pension increases. If pensions rise roughly with prices, the amount roughly matches today’s purchasing power. If you calculate spending, pension and return consistently in today’s euros with a real return, you do not need to add inflation separately.
For context: at 2 % inflation, €3,000 today equals about €5,100 in 27 years. Since 2026, the German pension level is fixed by law at no less than 48 % until the pension adjustment in 2031; what applies after that is open.
Where to find your figures
- Renteninformation from the Deutsche Rentenversicherung: yearly, with your expected standard pension.
- Digital pension overview (Digitale Rentenübersicht): brings together entitlements from state, company and private pensions in one place.
- Annual statements from company pensions, Riester and Rürup contracts and private pension insurance.
What can fill the gap
- Company pensions, often with an employer contribution.
- Private provision, such as an ETF portfolio, Rürup or Riester contracts, and from 2027 the new subsidised pension account (Altersvorsorgedepot).
- Rental income, especially from property whose loan is paid off by retirement.
- A later retirement or part-time work in the first years of retirement.
How portfolio, rent and pension add up, and with what probability, is worked through with 2,000 market paths in When can I retire?
Sources
- 01Deutsche Rentenversicherung: pension adjustment 2026 (German)
- 02Deutsche Rentenversicherung: Aktuelle Daten 2026 (German)
- 03§ 22 EStG (Income Tax Act): taxable share of pensions
- 04Digital pension overview (Digitale Rentenübersicht)
Rules and figures as of