The retirement age for taking out a pension is currently 67 years old. However, the lowest age for taking out a general pension is three years earlier, i.e., 64 years old.
After a long working life, many people look forward to retiring earlier, but may then be met with a negative surprise for their personal economy.
"Missing the tax side"
During a period, there may be an expensive gap between working life and pension, amounting to around 2,000-3,000 kronor per month for an average-income earner.
I received a question from a newly retired person just today. You spend a lot of time calculating your exact pension, but then you miss the tax side, says Joel Stade, an expert on pensioners' economy at PRO, the National Pensioners' Organisation.
The explanation is that as a pensioner, you receive approximately the same tax deduction – the increased basic deduction – as someone who works receives through the job tax deduction.
The mistake many make is that they think this is linked to when the pension starts to apply, when in fact it is linked to age, i.e., when you turn 67 years old.
This is what creates the "tax gap" and is something you must take into account, notes Joel Stade.
You must keep track of this if you want to retire earlier from working life. The important thing is that you are aware of this and don't get surprised when you receive less money than you had hoped, he says.
Tip: Work extra
For those who still want to retire before the age of 67, there are some alternatives to mitigate the economic shock, advises Joel Stade:
More and more people are becoming so-called "jobbonärer", i.e., they take out their pension and then continue to work, often not full-time. Then you get a job tax deduction on that money. It's a way to stretch your income a bit.
PRO has, however, raised the issue that they believe the tax system is unfairly designed for those who now find themselves in this situation. Therefore, they want to see a political solution, for example, by lowering the age limit for the increased basic deduction to the year the person turns 66 years old.
Pension is deferred pay, and we think you should go back and rebuild the entire tax system, because this is misguided, says Joel Stade.
From the year you turn 67, you are entitled to an increased basic deduction, i.e., a lower tax on your pension. This applies to people born between 1957-1959.
Those born in 1960 will receive the increased basic deduction from January of the year they turn 68.
For later generations, it has not been decided what age the increased basic deduction will apply from.
Sources: PRO, the Pensions Authority.
