Due to the tightening of the conditions for calculating early retirement, the use of early retirement is financially more advantageous than before the legislative changes took effect. Let’s look at practical examples and calculations in 2024.
It has been since October reduction for early retirement is always 1.5% of the calculation base for each started 90 calendar days of prematurity. Early retirement from the effective date of the legislative changes brings higher financial losses than was the case, for example, in September. The difference between regular pension and early retirement is currently higher.
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Pre-retirement and regular retirement
When pumping pre-retirementi.e. own money saved on the supplementary pension savings contract up to the regular retirement age, premature shortening can be avoidedwhich is even more significant than before due to legislative changes.
When using pre-retirement, it is necessary to take into account that due to its drawdown, the personal assessment base (average gross salary in current value) is not reduced, but at the same time the period itself drawing an early pension does not belong to the substitute insurance period, and therefore does not increase the decisive insurance period affecting the monthly amount of the old-age pension.
A practical example
Mr. Zdenek he will take early retirement in 2024, less than three years early (exactly 1080 days). The reduction of the calculation base amounts to 18% (12 × 1.5%). Originally, Mr. Zdeněk wanted to work until the regular retirement age, but in the end he decided to retire early for family reasons. Mr. Zdenek’s personal assessment base is CZK 43,000 and he obtained an insurance period of 43 years. Mr. Zdenek a monthly early pension of CZK 16,257 will be granted in 2024.
Mr. Karel will retire in 2024, while for the past three years he has been drawing an early pension. Mr. Karel’s personal assessment basis will also be CZK 43,000 (the advance pension did not reduce his personal assessment basis) and the insurance period will also be 43 years (the advance pension did not increase his insurance period). Mr. Karl will be granted a regular monthly old-age pension in the amount of CZK 20,846. Due to the use of pre-retirement he will have a monthly state pension amount of CZK 4589 higher than if he retired early, on the other hand, Mr. Karel will use up a significant part of the saved money before retiring.
Tip: Early retirement calculator 2023
Comparison of individual incomes
In the following table, for clarity, we have calculated early retirement in 2024 when retiring early 1,080 days earlier, in order to reduce it by 12x the 90 calendar days that have started, and the regular old-age pension, if three years of early retirement are drawn, always when obtaining an insurance period of 43 years and at different average wages. This means that:
- the personal assessment basis is the same in both casesbecause the average salary for the years worked is not diluted due to drawing early retirement,
- the obtained insurance period is also equally high in both casesbecause drawing early retirement does not increase the total period of insurance affecting the monthly amount of the old-age pension.
| Personal surveyor basis | Time insurance | Early retirement (previously by 1080 days) | A proper old man pension | Difference |
| 25,000 CZK | 43 years old | CZK 14,080 | 17,827 CZK | 3747 CZK |
| 30,000 CZK | 43 years old | 14,685 CZK | 18,666 CZK | 3981 CZK |
| 35,000 CZK | 43 years old | 15,289 CZK | 19,504 CZK | 4215 CZK |
| CZK 40,000 | 43 years old | 15,894 CZK | 20,343 CZK | 4449 CZK |
| CZK 45,000 | 43 years old | 16,498 CZK | CZK 21,181 | 4683 CZK |
| CZK 50,000 | 43 years old | CZK 17,103 | CZK 22,020 | 4917 CZK |
| 60,000 CZK | 43 years old | 18,312 CZK | 23,697 CZK | 5385 CZK |
| 80,000 CZK | 43 years old | 20,730 CZK | CZK 27,051 | 6321 CZK |
| CZK 100,000 | 43 years old | CZK 23,148 | CZK 30,405 | 7257 CZK |
| 130,000 CZK | 43 years old | 26,775 CZK | CZK 35,436 | 8661 CZK |
| 160,000 CZK | 43 years old | CZK 30,402 | CZK 40,467 | 10,065 CZK |
Source: author’s own calculation
With regard to the monthly amounts of early retirement and regular retirement, we clearly see from the table that people with higher incomes who have sufficient means to create sufficiently high savings even in their working age benefit more from drawing early retirement on the supplementary pension savings contract. Due to the tightening of conditions for early retirement, the attractiveness of using early retirement has increased, especially for people with above-average incomes.
Also read: Ten lies about pre-retirement
Tags: Practical examples early retirement pays early retirement
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