As Early Retirement Rules Tighten, More German Pensioners Take Side Jobs to Make Ends Meet

A growing number of Germans who retire before the standard age are now drawing substantial extra income from work, even as a government-appointed commission pushes to phase out the generous “pension at 63” option. The trend exposes a sharp disconnect between political efforts to keep people in the labour force and the financial reality that forces many to keep earning.

According to a June 2026 study by the Cologne Institute for Economic Research (IW), the share of early retirees with significant secondary earnings jumped immediately after the government scrapped earnings caps in 2023. Among workers with 45 contribution years — the group eligible for the most generous early-exit route — the proportion rose from 18 percent in 2022 to 25 percent in 2023. Critics say the policy sends contradictory signals: encouraging earlier retirement while decrying a shortage of skilled workers.

The financial pressure behind those numbers is mounting. A nursing-home place now costs an average of 3,364 euros per month — up 256 euros from the previous year. The average pension in 2024 stood at just 1,154 euros.

Commission wants to end early exit without deductions

At the centre of the debate is a set of proposals published in mid-July by a pension commission. The experts recommend gradually raising the retirement age from 2042 onward — by half a year per decade. Their central demand: scrap the deduction-free early pension at 63. To stabilise the pension level for new retirees at 48 percent, and eventually 50 percent by 2050, the commission calls for a funded supplementary pension financed by contributions starting at 1 percent of earnings and later rising to 2 percent.

The commission also proposes that politicians, self-employed professionals and corporate board members begin paying into the statutory pension system, and that civil servants be integrated over the long term.

Health data shows older workers are falling sick more often

These longer-working-age proposals collide with the latest health statistics. An analysis by the DAK health insurance fund for the first half of 2026 found that overall sick leave fell slightly to 5.3 percent. But among workers aged 60 and older, absence days rose by 0.3 percentage points.

Mental illness was the leading cause of work incapacity, jumping 9 percent. For every 100 insured members, there were 184 days off due to psychological conditions. Respiratory diseases declined sharply, while musculoskeletal disorders remain a heavy burden. In response, policymakers are planning a mandatory sick note from the first day of absence and the abolition of telephone-based sick leave.

East Germany faces particular risk of poverty in retirement

Left Party politician Dietmar Bartsch warns that a “poverty pension” looms for many full-time workers, especially in eastern Germany. There, 54 percent of full-time employees earn less than 3,700 euros gross per month — compared with 39 percent nationwide. To receive a pension above the poverty-risk threshold of 1,446 euros gross, a worker needs a monthly salary of at least 3,771 euros.

While the Federal Employment Agency reported a rise in the median gross wage to 4,217 euros in 2025 — an increase of 5.1 percent — regional gaps are stark. In Hamburg the median is 4,768 euros; in Mecklenburg-Western Pomerania it is just 3,497 euros.

SoVD expert Britta Wunderlich sharply criticised the commission’s plans. The proposed capital-funded pillar is too risky, she argued, and restricting early retirement amounts to a de facto pension cut for many affected.

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