We at India Initiative believe that retirement is when you stop living at work and start working at living. This last leg of your journey deserves to be, if not more, at least equally comfortable as your younger years. This implies that one must have enough wealth to support their lifestyle in those golden years. Most social security administrations across the globe state that their payments are only able to replace approximately 40% of the pensioners’ incomes.   

Aware of the inability to compensate its citizens with enough pension for their retirement, most countries, including Germany, offer several programs that allow for tax-deferred investments whilst providing sizable tax breaks on the invested amounts. In simple terms, not only the yearly income tax is reduced but also the taxes owed on the income your investments accrue are deferred, thus giving rise to an earning-on-earning compounding effect for your corpus.   

We at India Initiative, start by understanding our NRI customers’ retirement plans and preferences and consequently developing tailor-made plans for their retirement. Whether you are planning a retirement back home in India or are planning one here in Germany, or perhaps you want to build a retirement corpus and use it to pay off your retirement abode! The options are innumerable, and our versatile know-how enable us to offer an investment cycle that fits your needs comfortably!  

Several tax subsidized state retirement saving programs are out there and so are synergies we can offer our clients that help them design flexibility, substantial returns, reduced risk and minimized tax consequences into their personalized wealth plans!   

Tax Saving

A well-chosen retirement plan could save you up to thousands of euros in income tax you pay to the government.  

Tax-Deferred Income

The ideal retirement plans offer tax deference until after you retire which fuels your wealth accumulation as well as reduces the tax owed as you pay them as per retirement brackets. 

Flexibility 

Depending on the retirement plans you chose, pay-outs can be in part, lumpsum or as pension for life long.  

A Clear Strategy

Essential to any wealth plan is having a clear strategy which allows for different expense scenarios to be taken care of without diminishing your retirement income.  

Synergies with Life Insurance

Any career is certain to have an end date, but so does life. Alternatives allow for retirement plans in combination with insurance covers to take care of your family in your absence.  

Change is Inevitable

Some start too late or some are not able to continue at the same level of investment because of circumstances, allowance for flexibility in this regard is essential and an ideal retirement plan is one that takes care of your pension for life in either case. 

1st Option: Rakesh A

Rakesh A is 30 years old and has chosen a two-part retirement plan with his wealth manager. A monthly investment of 500 Euros in mutual funds which results in total accrued wealth of 6.198 Euros at the end of the year, given a fund performance of 6%.  

After completing 12 months, the accrued 6.198 Euros are invested in a government sponsored retirement plan which is a tax-deferred plan while providing for a maximum possible 43% tax return. The tax return could be for each investment year totals to 2.665 Euros.  

By the age of 63, Rakesh would have invested 198.000 Euros for his retirement, of which he would have received 88.000 Euros back in tax returns and created a retirement corpus 640.000 Euros. 

2nd Option: Rakesh B

Rakesh B is 30 years old and has purchased an investment property worth 250.000 Euros in a growing Tier 2 city of Germany. The sum of the monthly mortgage payment and Haus geld, is 1.000 Euros while the rent received monthly is 900 Euros.   

With a mortgage finishing before his retirement, he would receive a monthly gross pension of 3.300 Euros in form of rental income from this property (inflation-adjusted). Total invested amount which he has paid is 118.000 from his own pocket including an assumed maintenance cost of 200 Euros for every month for 33 years.   

Apart from benefits from the tax-deductible annual interest rate paid to the bank for investment properties, the value of the real estate when Rakesh is 63, would be approximately 663.000 Euros if a 3% CAGR is assumed.   

3rd Option: Rakesh C

Rakesh C is 30 years old and has chosen a government sponsored retirement plan which permits him to invest 175 Euros every month. Since he is married and has two kids, he invests 110 while the state contributes the 65 Euros difference each month towards his retirement investment.    

Over 33 years of contribution, he has accumulated 200.000 Euros in his retirement corpus while having invested only 43.000 Euros from his pocket. The remaining corpus consists of accrued compounding interest, state’s cash benefits and the accrued interest on those amounts.   

He can use this accumulated wealth to either pay for a property where he will reside during his retirement, receive pension lifelong or alternatively a mix of both options. 

4th Option: Suresh

Suresh is 30 years old and has not made any investments towards building a substantial retirement fund. He is planning his retirement based on the state pension that he is due to receive which amounts to approximately 2.000 Euros every month.   

His current expenses for the entire family excluding housing are 1.500 Euros, which at a compounded inflation rate of 2% would sum up to be 2.900 Euros each month when he retires. Unfortunately, these expenses would continue to increase at the inflation rate prevalent at that time.