How {appName} calculates your retirement provision
Every calculator on this site — pension gap, withdrawal, Frühstart-Rente — runs on the same calculation logic. Here's the full explanation, no black box.
{appName} projects your capital from today to retirement using your own savings rate and return assumption, then compares it to the capital needed for your desired income, accounting for inflation, the statutory pension, and simplified tax rates. On top of that, a Monte Carlo simulation runs 500 randomized return paths to show how much the outcome can vary by market conditions — instead of a single, falsely precise success probability.
Return assumption
A number you enter yourself
There's no hidden default return. You enter your expected annual return directly (e.g. 5–7% for a broadly diversified equity ETF, less for more conservative mixes), and the calculator projects your capital forward using exactly that value — held constant across the whole accumulation and withdrawal period.
Inflation
Purchasing power, not just the account balance
You enter your desired income in today's purchasing power. During the withdrawal phase, the monthly payout rises each year by the inflation rate you set, so you can afford the same real amount at the end as at the start — not just the same nominal figure. The statutory pension is deliberately not inflated further, because in Germany it's wage-indexed rather than CPI-indexed.
Making uncertainty visible
Monte Carlo simulation instead of a success rate
The deterministic projection assumes a constant return — real markets fluctuate year to year. The Monte Carlo simulation runs 500 randomized return paths around your expectation (five scenarios from "very cautious" to "very optimistic", each with its own volatility) and shows you a range (10th/50th/90th percentile) instead of a single number. Deliberately no "success probability in %" — that would fake a precision a model with this many assumptions can't deliver.
Withdrawal order
Why the order of returns matters
A crash shortly after retirement hurts more than the same crash ten years later, because you're already withdrawing capital during the loss phase (sequence-of-returns risk). That's why {appName} recommends a cash buffer covering 24 months of withdrawal needs to cushion crash years, while the statutory pension and fixed income form the base and your portfolio only covers the rest — including the annual €1,000 Sparerpauschbetrag tax allowance.
Taxes
Simplified but realistic rates
Capital gains are taxed by default at 26.375% (capital gains tax plus solidarity surcharge), with the annual €1,000 tax-free allowance applied automatically. For the statutory pension and annuity payouts, the calculator applies a simplified rate approximating Germany's phased-in pension taxation — not an individual assessment, but far closer to reality than "tax-free".
Limits of this model
What this model can't do
This is a simplified model, not individual financial, tax, or pension advice. It doesn't know about future tax reforms, irregular cash flows, or your personal life expectancy — only statistical assumptions. Use the results as orientation, not a guarantee.
Sources
What the assumptions are based on
Tax rates: German Income Tax Act (capital gains tax, Sparerpauschbetrag). Pension taxation: German Federal Ministry of Finance. Pension level and life expectancy: German Pension Insurance (Deutsche Rentenversicherung), Federal Statistical Office (Destatis).
Try it yourself
The calculators that use this methodology
Frequently asked questions
Questions about the methodology
That depends on your investment strategy — historically, broadly diversified equity ETFs delivered around 6–8% p.a. nominal long-term, more conservative equity/bond mixes correspondingly less. The calculator doesn't make an assumption for you; try several values and compare against the Monte Carlo range.
The deterministic projection assumes exactly your set return every year — useful for quickly playing with numbers. The Monte Carlo simulation lets the return fluctuate randomly around that value each year, giving you a more realistic range of possible outcomes instead of a single line.
No. It's a model calculation based on the values you enter, and doesn't replace individual financial, tax, or pension advice.
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