Pension Gap Calculator: How Big Is Your Gap Really?
Most pension gap calculators produce fair-weather numbers: they ignore inflation until retirement, taxes on the pension and health insurance contributions. If you want a serious figure for your gap, you need three honest corrections — and then a clear answer to how much portfolio capital actually closes it.
The formula — with the three uncomfortable corrections
At its core: pension gap = net income needed in retirement − expected net pension. The levers matter:
- Pension level: the German standard state pension is around 48% of average gross income — your personal figure is in your annual pension statement, projected with optimistic assumptions.
- Taxes and contributions: pensions are taxed downstream, plus health and long-term care insurance. Depending on your case, only 80–85% of the gross pension remains net.
- Inflation: at 2% inflation, purchasing power halves in roughly 35 years. A pension of €1,800 that feels comfortable today is worth only about €1,000 in real terms in 30 years.
Example: you need €2,800 net today and expect €1,700 net pension (in real terms) — gap: €1,100 per month.
Forecasts and simulations based on your actual portfolio instead of sample values – free with MoneyPeak.
How much capital closes the gap?
The withdrawal rate turns the monthly gap into a capital target. The well-known 4% rule gives the rule of thumb: annual gap × 25. More conservative withdrawal rates raise the target considerably:
| Monthly gap | Capital at 4% withdrawal | At 3.5% | At 3% |
|---|---|---|---|
| €500 | €150,000 | €171,000 | €200,000 |
| €1,100 | €330,000 | €377,000 | €440,000 |
| €2,000 | €600,000 | €686,000 | €800,000 |
From gap to portfolio strategy
Once the target is set, only the savings rate matters: at historically around 7% p.a. nominal in equities, you reach €330,000 (real) with roughly €400–700 per month depending on your horizon — the earlier you start, the harder compounding works. Don’t forget German capital gains tax: tax on gains is due when you sell, softened by the 30% partial exemption for equity ETFs. How to withdraw the capital later without depleting it early is what the withdrawal plan calculator models.
Frequently asked questions
How accurate is the German pension statement?
The projection assumes you keep contributing as before and applies assumed pension increases. You have to subtract taxes, social contributions and inflation yourself — otherwise you significantly overestimate your net pension.
Which withdrawal rate should I use for the capital target?
The 4% rule is the starting point, but it is based on US data and a 30-year horizon. For longer retirements or more safety, 3–3.5% is the more robust assumption.
Should I calculate the gap in real or nominal terms?
In real terms, i.e. today’s purchasing power. Express your target income and expected pension inflation-adjusted — then the capital target is also in today’s euros.
Forecasts and simulations based on your actual portfolio instead of sample values – free with MoneyPeak.