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Investments & Pension plans, retirement planning
part II.

When we talk about the planning of retirement, there are many factors that need to be taken into account. Some important questions to ask yourself are:

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  • How long will it be before I retire?

  • How much money will I need when retired?

  • And will my need for income change during the retirement period?

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Since it is often quite large sums to be spent, it will be a really good idea to start planning your retirement life well in advance of the day.

In general, it can be said that the Danish pension system is a complex entity. A pension system must solve many different tasks at the same time. Quite simply, it can be said that a pension system must ensure that all citizens have a sufficient income throughout their retirement life, regardless of what working life they may have had.
 

In this Module 2, you can see a little about what is required to gain access to the governmental paid benefits.

If you do not meet the requirement for residence wounds during the vesting period, you may still be entitled to part of the state retirement pension. This part is calculated as a fraction on the basis of the time you have lived in Denmark during the vesting period, in relation to the requirement for the full basic amount.

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The retirement age in Denmark is currently as follows:

 

Date of birth                                       National retirement age

31 December 1953 or earlier                 65 years

January 1, 1954 - June 30, 1954           65 years

July 1, 1954 - December 31, 1954         66 years

January 1, 1955 - June 30, 1955           66 years old

July 1, 1955 - December 31, 1962         67 years

January 1, 1963 - December 31, 1966   68 years

January 1, 1967 or later                       69 years
 

Labor market pension

 

The second group consists of labor market pensions. The purpose here is to create an income equalization through life and a balance between the income before and after retirement. The labor market pensions are determined via collective union agreements or local agreements and are savings-based.

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Here it is crucial how long you have been associated with the organized labor market. The longer the time, the greater your retirement savings will be.
 

Private pensions

 

The third group consists of the individual pension schemes. Here, citizens have the opportunity to secure one individual flexibility, for example in relation to the payout profile. But the group also has a role in relation to income equalization, and this is also where the people who are not covered by the labor market pensions in the second group (eg the self-employed and employees in the unorganized labor market) have the opportunity to save up for retirement.

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While the state and the social partners create some framework for what is socially “reasonable

and necessary ”to save up for retirement, it is ultimately the individual citizen who has the task of making choices about exactly how one wants to be covered. It is thus the individual himself who must assess whether it is necessary for him or her to supplement his or her pension savings with an individual savings.

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Other elements that should be considered

 

If you have cash holdings or values that can be realized, these should also be part of the overall retirement plan. It is often seen that over time, people with owner-occupied housing create a not insignificant fortune. By selling your home, you will thus be able to get a larger amount included in the retirement plan.
 

As an alternative to selling your home, the property's freehold value can also be used to make a so-called " dis-savings ". In the event of a dissaving, part of the freehold value is paid out on an ongoing basis, whereby the freehold value over time becomes smaller and smaller.
 

In general, it is important to have a financial overview of your situation now, and how you can realistically imagine it will look like in the future. In practice, this is done by making private budgets, and thus gaining knowledge about how great one's need for savings is.
 

It is also important to stay up to date on the legislative measures that are taken regularly, as these can have a major impact on the retirement plan.

Once you’ve read the text on the topic, it’s time to test your knowledge.

Solve the following practice exercises!

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