Recently we published an essay about the German pension insurance under the title "How the Father State plunders me". As a matter of fact, German pension system is mainly based on a so-called generation solidarity principle: current employers finance current pensioners (and are supposed to be financed by the following generation as they, themselves, retire). It worked well in Bismarck's time but with current longevity and low birthrate the system is not capable anymore! The calculations with German mortality tables shows: were the employers allowed to invest their contributions themselves, they would not be inevitably condemned to the Altersarmut (elderly poverty).
Though Germans have both private pension insurance and Betriebliche Altersvorsorge (similar 401k plans) they are mainly fixed-interest (thus with current rates they even don't cover the inflation). Still they are much more attractive than the compulsory insurance by the state pension fund.
We welcome all USA citizens and residents to check, whether Uncle Sam plunders you like the Vater Staat robs the Germans. The calculator is based on the SSA Actuarial Life Table. To put it briefly: your contributions to this day are accrued with the implied growth rate. Your future contribution and your future pension are discounted with the implied rate and mortality probability. The latter can be calculated from the life table (which is very accurate), whereas the former can hardly be forecasted in advance. Thus we take three scenarios for the implied growth rate: 1% (which can still be yielded with long-term bonds), 3% (what every qualified wealth manager should be able to achieve) and 6% (the average long-term growth rate of the Dow Jones). We don't take into account the taxes and insurance company's fees, so the calculation results are, in a sense, the upper bound of what you get.
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