Private Savings

Private retirement savings means independent investing through a brokerage account (Depot), typically in exchange-traded funds (ETF). Unlike subsidized pension products (Riester, Rürup, bAV), you retain full control over money: can withdraw anytime, change strategy, or pass to heirs.

This approach suits the Ladder phase (from 2 years in Germany): requires stable income, understanding of tax system, and readiness to manage investments independently. In the Boat phase (the first 24 months after moving) the emergency fund comes first.

Why Private Savings

The Rentenniveau (pension level) is 48% in 2026: the standard pension after 45 years of average-earnings contributions, relative to the average wage; this floor is fixed until 2031 [1]. For immigrants who started contributions at 30–40, the share will be lower because there are fewer contribution years.

Advantages of private savings:

• Full control: you decide where to invest and when to withdraw
• Flexibility: access to money anytime (not locked until 62–67)
• Inheritance: capital passes to heirs, doesn't burn
• Low fees: ETFs charge 0.1–0.3% annually vs 1.5–2.5% for active funds (Morningstar, 2024) [2]

Main Instrument: Depot

Depot (brokerage account) is an account for buying securities (stocks, bonds, ETF). A Depot is opened at a bank or an online broker; many online brokers charge no account fee, some banks charge one (Depotgebühr).

Basic strategy: automatic monthly contributions (Sparplan) into diversified ETFs.

Comparison with Subsidized Products

Criterion	Depot with ETF	Riester/Rürup/bAV
Flexibility	Full: can change strategy anytime	Rigid restrictions: fixed contract
Access to money	Anytime (with tax on profit)	Locked until 62–67
Inheritance	Full: capital passes to heirs	Limited or absent
Taxes on withdrawal	26.375% on profit; for equity funds about 18.46% after the 30% Teilfreistellung (partial exemption) [3][13]	Payouts taxed as income (Rürup partly, the share depends on the year payouts start)
Fees	0.1–0.3% annually (ETF) [2]	1.5–2.5% annually (active funds) [2]
State support	No	Yes (subsidies, tax deductions)

How Much to Accumulate

4% Rule

The 4% rule (William Bengen, 1994): withdrawing 4% of the starting capital, raised each year with inflation, a portfolio of US stocks and bonds survived every historical 30-year period since 1926 [4]. This is past US market data, not a guarantee.

Calculation example:

• Need €2,000/month = €24,000/year
• Target capital: €24,000 ÷ 0.04 = €600,000

Accounting for State Pension

Private savings complement state pension (GRV), don't replace it.

Example:

1. Desired retirement income: €2,500/month
2. Expected GRV pension: €1,200/month
3. Gap: €1,300/month = €15,600/year
4. Target capital: €15,600 ÷ 0.04 = €390,000

If you have a bAV, its expected payout is also subtracted from the gap.

Estimate future pension via annual Renteninformation letter or calculator on Deutsche Rentenversicherung website [5].

How Much to Save Monthly

To reach €400,000 by 67 at a 5% real annual return, you need to save €234 a month if you start at 25 and €835 if you start at 45 (Geldchen calculation). The calculation assumes monthly compounding and that all profits are reinvested; the return is above inflation, the target is in today's money, taxes and costs are left out. World equities have returned 5.2% a year above inflation on average since 1900 [6].

Starting Age	Years to 67	Target €400,000	Monthly Contribution
25 years	42 years	€400,000	€234
35 years	32 years	€400,000	€423
45 years	22 years	€400,000	€835

The later you start, the higher required contributions: starting at 45 requires saving about 3.5 times more than starting at 25.

For immigrants arriving in Germany at 30–40, this means a higher savings rate than local peers. Geldchen counts the savings rate from take-home pay and includes only what you set aside from net income; bAV contributions are not added back, and the company pension counts separately, as pension savings. You can check what share of income you already save, and where the money sits, in the savings checklist.

Strategy

Accumulation Phase (before retirement)

The core of the strategy is regular automatic contributions (Sparplan) and holding positions for the long term.

• Sparplan (savings plan): an automatic monthly debit of a fixed amount to buy ETFs. It lowers the risk of a badly timed entry (cost averaging).
• High stock allocation (80–100%): younger investors can take more risk for a higher expected return. Over 30+ years the spread of annual returns narrows, but losses remain possible.
• Reinvesting: accumulating ETFs (thesaurierende ETF) reinvest dividends automatically, which speeds up growth.

Consumption Phase (in retirement)

Gradually reduce risk and withdraw regularly under the 4% rule.

• Selling in parts: you sell as needed, for example one year of expenses at a time; the rest keeps working.
• Lowering the stock share: 5–10 years before retirement, part of the money can move step by step into bonds or money-market funds. How much depends on two criteria: how many years of expenses you want to hold outside stocks, and how large a portfolio drop you are prepared to live through.

Tax Optimization

Investment profits (dividends, interest, capital gains) are taxed at 26.375% in 2026 (25% Abgeltungsteuer, the flat tax on capital income, + 5.5% Solidaritätszuschlag, the solidarity surcharge, on it; church tax, if applicable, comes on top) [3].

Freistellungsauftrag (Tax Exemption)

Freistellungsauftrag is an instruction to your broker not to withhold tax within the Sparerpauschbetrag (tax-free allowance): €1,000 of investment profit per year, €2,000 for married couples (2026) [8]. Filed online in broker's personal account.

With several brokerage accounts, the allowance is split between them by the profit expected at each; all orders together cannot exceed €1,000 (€2,000 for couples).

Tax Deferral

Accumulating ETFs (thesaurierende ETF) reinvest dividends automatically. Part of the tax is still charged every January through the Vorabpauschale (advance tax on funds); the rest is due on sale. The deferred part keeps earning returns.

Distributing ETFs (ausschüttende ETF) pay dividends to account, and tax is withheld immediately.

Sale Order (FIFO)

In Germany, FIFO (first in, first out) principle applies: when selling, securities purchased earliest are considered sold first [7]. The holding period does not affect the tax. The exception is securities bought before 2009: for funds, only the gain up to the end of 2017 is tax-free, and the gain from 2018 on is taxed above a €100,000 allowance.

Combined Approach

Private savings can be combined with subsidized products. Selection criteria:

Product	When It's Considered	What to Check
bAV (betriebliche Altersvorsorge)	Employer adds to your contribution: 15% by law where the employer saves social contributions (capped at that saving) [12], more by agreement	Whether the employer's contribution outweighs the contract's costs; the money is locked until retirement
Private Depot with ETF	You value flexibility, control, low fees	Emergency fund and horizon: money in stocks shouldn't be needed for 10+ years
Riester	You have 2+ children and income under €50,000/year (orientation)	Old-style contracts can only be signed until the end of 2026, from 2027 the Altersvorsorgedepot; whether subsidies outweigh fees
Rürup	You're self-employed with high income (orientation: over €80,000/year)	Whether the tax deduction (up to €30,826 in 2026, together with GRV contributions) matters more than access to the money: Rürup can't be cashed out or sold

Basic logic: the employer's bAV contribution is money a private Depot doesn't get, while a private Depot gives you control over risks and costs. The order depends on the size of the employer contribution and the costs of the bAV contract.

Psychological Dimension

For immigrants from countries with unstable financial systems, the idea of "trusting money to market for 30 years" triggers natural skepticism. You've seen "guaranteed" pension funds collapse, deposits devalue, accounts freeze.

German system is structurally different:

• BaFin regulation: brokers are licensed; securities in your Depot belong to you and stay outside the broker's estate if it fails, and the fund's own assets (Sondervermögen) are kept separate from the management company [9]
• Deposit insurance: cash on account insured up to €100,000 [10]
• Transparency: ETF prices are public, fund composition is known

Trust isn't built in a day. Some people start with an amount they could afford to lose, such as €50 a month in a broad ETF, and watch the swings for 6–12 months. The point of such a start is calibrating trust; returns are secondary.

The math only works if you can hold your position through a crisis. If you sell everything in panic during a 30% market drop, ETFs won't help. The upper limit for investing is a "pain threshold" set in advance: the amount you can calmly hold for 10+ years.

FAQ

Not legal or financial advice.

I'm 40 and only recently started in Germany — is it too late for the 4% rule?

The 4% rule assumes a 30-year withdrawal period. Starting at 40 with 27 years until the retirement age of 67 means a shorter accumulation phase, requiring higher monthly contributions. For a target of €400,000 at a 5% real annual return: starting at 25 requires about €234 a month, at 35 about €423, at 40 about €586. The gap is significant but not insurmountable. Key factors: (1) the GRV (gesetzliche Rentenversicherung, statutory pension insurance) pension will also supplement income — immigrants with 25+ years of contributions still build meaningful pension rights; (2) existing assets from the home country (if transferable) accelerate the timeline; (3) the target amount may be lower if you plan to retire in a lower-cost country. The math works at any starting age — the required input changes, not the principle.

Is it better to invest a lump sum or via Sparplan (DCA)?

Historically, lump-sum investing outperforms DCA (dollar-cost averaging) approximately 67% of the time, because markets trend upward and money invested earlier has more time to compound (Vanguard 2012 study across US/UK/Australian markets) [14]. However: (1) DCA via Sparplan (automatic savings plan) reduces the psychological risk of investing at a market peak — relevant for immigrants making their first investment after years of cash savings; (2) a common hybrid approach: invest 50% immediately, spread the remaining 50% over 6–12 months via Sparplan; (3) the difference between lump sum and 12-month DCA is typically 1–3% of the total amount — meaningful for amounts over €100,000, negligible for €10,000. The psychologically correct decision is the one you can sustain without panic selling during a downturn.

My spouse and I have different risk tolerances — how to handle this?

This is common in immigrant households where one spouse had direct experience with financial crises and the other did not. Structural approaches: (1) separate Depots (brokerage accounts) with different allocations — one partner 80% stocks / 20% bonds, the other 40/60 or 100% Tagesgeld (savings account); (2) shared portfolio with a compromise allocation (e.g., 60/40) — simple but neither partner's preference; (3) defined "risk budget" — agree on a maximum portfolio drawdown (e.g., 20%) and adjust allocation accordingly. The German tax system supports either approach: each spouse has their own €1,000 Sparerpauschbetrag (saver's tax-free allowance, 2026). Separate Depots also provide legal clarity. The conversation between spouses is harder than the math — the psychological dimension of financial decisions within immigrant couples deserves dedicated attention.

What happens to my Depot if I leave Germany (Wegzugsbesteuerung / exit tax)?

For shares, Wegzugsbesteuerung (exit taxation, § 6 AStG) covers stakes of 1% or more in a company, so it affects founders, not typical ETF investors. For fund units, ETFs included, a separate rule applies since January 1, 2025 (§ 19 Abs. 3 InvStG) [11]. On leaving Germany, units are treated as sold if you were a German tax resident for at least 7 of the last 12 years and, for a given fund, one of two conditions is met: (a) you held at least 1% of the fund at any time in the 5 years before leaving; (b) the acquisition cost of your units in that fund is at least €500,000 at the time of leaving. Returning to Germany within 7 years can cancel the tax. Ordinary diversified ETF portfolios stay below these thresholds (details in the ETF article). However: (1) once your broker learns of the move, it may close the Depot or restrict it: many German neo-brokers serve residents only; (2) gains realized BEFORE departure are taxed in Germany; (3) the new country's tax rules apply from the move, and some countries tax unrealized gains on arrival. If your German broker doesn't serve non-residents, the Depot is moved before departure to a broker that accepts clients from the destination country. Taxing rights on gains after the move are split by the DBA (Doppelbesteuerungsabkommen, double taxation agreement) between Germany and the new country.

I have savings in my home country's currency — convert and invest or keep separate?

Factors to evaluate: (1) currency risk — holding concentrated currency exposure (e.g., 100% in RUB, TRY, or UAH) carries devaluation risk that has materialized repeatedly in post-Soviet countries; (2) convertibility — some currencies have capital controls that make conversion difficult or expensive; (3) opportunity cost — if savings earn 5% in local currency but the currency depreciates 15% against EUR, the return in euros is about −11%; (4) taxes — as a German tax resident you pay German tax on interest from deposits abroad too; currency gains on conversion may also be taxable — details with a Steuerberater (tax adviser). A common diversification approach: maintain a reserve in local currency for potential obligations in the home country (family support, property), convert the remainder to EUR-denominated investments. The total currency allocation is a personal risk decision, not a mathematical optimization.

Sources

1. Bundesministerium für Arbeit und Soziales — Rentenpaket 2025 beschlossen (Haltelinie: Rentenniveau 48% until 2031, in force from 2026) — https://www.bmas.de/DE/Service/Presse/Meldungen/2025/rentenpaket-2025-beschlossen.html — 2025
2. Morningstar — European ETF Fee Study 2024 — https://www.morningstar.com/lp/european-etf-fee-study — 2024
3. Einkommensteuergesetz § 32d Abs. 1 (25% rate); Solidaritätszuschlaggesetz § 4 (5.5%) — https://www.gesetze-im-internet.de/estg/__32d.html, https://www.gesetze-im-internet.de/solzg_1995/__4.html — 2026
4. William Bengen — Determining Withdrawal Rates Using Historical Data, Journal of Financial Planning — 1994 (original 4% rule study)
5. Deutsche Rentenversicherung — Rentenschätzer — https://www.deutsche-rentenversicherung.de/DRV/DE/Online-Dienste/Rentenschaetzer/rentenschaetzer.html — January 2025
6. UBS — Global Investment Returns Yearbook 2025 (Dimson, Marsh, Staunton): world equities real return 5.2% a year over 125 years (1900–2024) — https://www.ubs.com/global/en/investment-bank/insights-and-data/2025/global-investment-returns-yearbook-2025.html — 2025
7. Einkommensteuergesetz § 20 Abs. 4 Satz 7 (FIFO); Investmentsteuergesetz § 56 Abs. 6 (fund units bought before 2009: gains up to the end of 2017 tax-free, from 2018 a €100,000 allowance) — https://www.gesetze-im-internet.de/estg/__20.html, https://www.gesetze-im-internet.de/invstg_2018/__56.html — 2026
8. Einkommensteuergesetz § 20 Abs. 9 (Sparer-Pauschbetrag €1,000 / €2,000), § 44a (Freistellungsauftrag) — https://www.gesetze-im-internet.de/estg/__20.html, https://www.gesetze-im-internet.de/estg/__44a.html — 2026
9. BaFin — Einlagensicherung und Anlegerentschädigung — https://www.bafin.de/DE/Verbraucher/Bank/Einlagensicherung/einlagensicherung_node.html — January 2025
10. Einlagensicherungsgesetz § 8 Abs. 1 (€100,000 per depositor per bank); Entschädigungseinrichtung deutscher Banken (EdB) — https://www.gesetze-im-internet.de/einsig/__8.html, https://www.edb-banken.de/ — 2026
11. Investmentsteuergesetz — § 19 Abs. 3 InvStG (exit rule as amended by the Jahressteuergesetz 2024, in force from 1 January 2025) — https://www.gesetze-im-internet.de/invstg_2018/__19.html — 2026
12. Gesetz zur Verbesserung der betrieblichen Altersversorgung (BetrAVG) — § 1a Abs. 1a (15% employer contribution where the employer saves social contributions) — https://www.gesetze-im-internet.de/betravg/__1a.html — 2026
13. Investmentsteuergesetz — § 20 InvStG (30% Teilfreistellung for equity funds) — https://www.gesetze-im-internet.de/invstg_2018/__20.html — 2026
14. Vanguard Research — Dollar-cost averaging just means taking risk later (lump sum beat DCA about two-thirds of the time; US, UK, Australia) — https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf — 2012