As you approach life in retirement, five questions are particularly important for you to ask yourself. When you have answered these, you have set the foundations for your retirement. It sounds easy, but you need to consider many things and make many decisions before finding the answers.
When do you plan to retire? Society prefers you to work for as long as possible. You will therefore get a number of advantages if you postpone your retirement, such as a higher early retirement benefit rate, tax-exempt premium, additional life-long supplement to state retirement pension, etc.
If you want to continue working
If you want to continue working, different rules apply depending on your age. You can learn more about the rules in the linked fact sheets, targeting the different retirement ages.
Each time you postpone your retirement by one year, you earn an additional annual salary and you also give your pension savings the opportunity to grow.
If you are not enrolled in an early retirement scheme, part-time retirement may be an option.
Where do you want to live when you retire? Senior life is lived locally. Your dwelling is the physical setting of your life, a part of your finances and your home, which may carry memories from a long and good life. Your dwelling should meet your needs on the day you retire, as you will spend far more time at home.
Financial support
You may be eligible for benefits to help pay your housing expenses. Housing benefits are offered as a loan for owner-occupied homes and co-operative housing units and as a subsidy for rental homes. You can calculate your options at www.borger.dk.
Postpone taxation
When you or your spouse receives early retirement benefits, supplementary early retirement benefits, part-time retirement benefits, state retirement pension benefits or anticipatory pension benefits, or reaches the age of 65, you may have the option to freeze your property taxes.
Life expectancy is increasing for both men and women
For quite some time, the trend has been that we live longer, and the indication is that this will continue. 20 years ago, the average life expectancy for Danes was 72 years for men and 78 years for women, respectively. Today, the average age for men is 77 years and for women 82 years.
While we should enjoy the prospect of living longer, we should also remember that a long life leads to greater demands on our pension savings, as most people will need their savings to be paid out over a longer period of time.
Clearly, many different factors influence your life expectancy, such as genetics, your choice of career and your lifestyle.
How much money will you need when you retire? Danica Pension recommends that you have 80% of your previous income when you retire, and that the majority of your savings are paid out as life-long benefits. But it is far from certain that this fits your needs. If your lifestyle differs from most people’s, you should consider what is most suitable for you – what it will cost you, or what you will save.
Think ahead
Maybe you also want to actively participate in society when you retire. Then you should consider ensuring that your financial needs are not only inflation-proofed but that they are also adjusted for the cost of living. New things happen all the time. New technology, new travel destinations, new housing standard demands, etc. And just like when you were young, you do not want to live like your parents, but like everybody else. A cost-of-living adjustment of 1.5% and inflation adjustment of 2.5% are realistic.
Who is to inherit your assets? If you are survived by a spouse and/or children or grandchildren, your assets will, as a general rule, be distributed in equal shares between your spouse (50%) and your children or grandchildren (50%).
Distribution of your remaining assets according to the provisions of
the Danish Inheritance Act
Do you prefer another distribution?
If you want your assets to be distributed differently, you need to consult an attorney and draw up a will. In many cases, you can designate specific persons on your pension scheme outside the rules of the Danish Inheritance Act. Keep in mind, however, that if you have a spouse and/or children or grandchildren, at least 25% of your estate must be inherited by them. This means that you can leave 75% of your estate by will – and your entire estate if you leave no beneficiaries entitled to an indefeasible portion of your estate.
