Widow pensioners: Make their private pension exempt from contributions and switch to ETFs? - Financial expert gives clear answer

Widow pensioners: Make their private pension exempt from contributions and switch to ETFs? - Financial expert gives clear answer

According to a report by www.t-online.de, a 42-year-old widowed pensioner asked an important question: Should she make her private pension insurance non-contributory and instead pay into an ETF savings plan?

The pension question is of great importance because many incomes are counted towards a widow's or widower's pension, but not all in the same way. According to the income tax association Vereinigte Lohnsteuerhilfe e.V., 40 percent of the widow's pension is deducted from wages, while rental income is generally deducted at 25 percent.

The income from an ETF savings plan would also reduce the widow's pension, but to a lesser extent compared to the private pension. This is because private pensions are treated like wages when credited, while capital gains are treated like rental income.

It is difficult to say generally whether the reader would retain more of her survivor's pension if she invested in ETF shares instead of continuing her private pension insurance. It depends on the development of the various forms of investment. Switching to an ETF savings plan can make sense, especially if the private pension insurance is not a fund-linked insurance. Because fund-linked insurance can also invest in ETFs.

It is also recommended to avoid traditional pension insurance, as these provide low returns and incur high costs. In contrast, an ETF savings plan is cheap and brings higher returns in the long term. However, it is important to rely on a broadly diversified ETF and only invest money that you can do without for at least 15 years in order to ride out possible crises on the stock market.

Overall, it turns out that the decision between a private pension insurance and an ETF savings plan depends on various factors, including the type of pension insurance, the amount of income and the individual financial situation. It is advisable to seek individual advice from financial experts to make the best decision.