Protected assets for citizen’s income for (former) self-employed higher than the well-known 15,000 / 40,000 EUR
It is generally known that 40,000 EUR in assets in the first year and 15,000 EUR from the second year onward, as well as a “reasonable” car and a self-used property, are not counted when receiving citizen’s income.
Less well known is that persons who were (or still are) primarily self-employed are allowed significantly more protected assets.
What sounds like a preference for the self-employed to people who have always been employed is merely a relief for the group of self-employed people, who often, due to the lack of an employer, naturally paid too little into the state pension system.
There is, therefore, no reason to envy the self-employed, who are often at risk of poverty.
P.S.: In addition to the pension, there is another significant cost trap, especially for the self-employed, in the topic “Compulsorily Insured in the Health Insurance for Pensioners.”
So, no need for envy; the self-employed in Germany are not exactly treated to a red carpet, even if they come out unexpectedly well on the topic of this article.
Protected assets for retirement for the self-employed
First, the most interesting aspect – aside from the amount: This additional protected asset, or more precisely: completely uncounted assets, for former or current self-employed individuals is NOT tied to insurance products or similar.
Thus, this wealth, which is not considered for citizen’s income, can be held in any form, such as cash, gold, stocks, bitcoins, ETFs, or even as non-self-used, rented real estate.
Any income from rental profits would, however, be counted, as would dividends or an increase in the value exceeding the maximum amount of uncounted assets described below. This is about existing assets, not ongoing income.
So, to summarize: Recipients of citizen’s income who were or are self-employed for many years can have additional assets that are not counted, on top of the well-known 40,000 EUR (1st year) and 15,000 EUR (from the 2nd year onward).
As of September 2024, the amount of this uncounted asset can be more than 400,000 EUR.
Amount of additional, uncounted, “freely managed” assets for (former) self-employed
The amount of assets that are not counted for former or current primarily self-employed individuals depends on the number of years in self-employment and is calculated as follows:
[¹] (Number of completed years of primary self-employment in which no contributions were paid into the statutory pension scheme, a public insurance institution, or a professional group pension scheme)
X (multiplied by)
[²] (Contribution rate to the general pension scheme under § 158 of the Sixth Book of the Social Code)
X (multiplied by)
[³] (Average income according to Annex 1 of the Sixth Book of the Social Code)
Source: SGB II, Chapter 2, §12, Paragraph 1, Sentence 4: https://dejure.org/gesetze/SGB_II/12.html
Explanations of the Calculation
[¹] Number of completed years without payments into the pension scheme: This concerns the state pension scheme and equivalent schemes; payments into a private pension scheme would not be detrimental, and the relevant year would be counted.
[²] Pension insurance contribution rate (at the time of the citizen’s income application): This is currently 18.6 percent (as of 2024).
[³] Average earnings according to the Social Insurance Calculation Regulation (at the time of the citizen’s income application): This is 45,358 EUR (as of 2024). This is not about the individual income of the self-employed person, but a generally applicable statistical value.
Sample Calculation
The amount of uncounted assets depends on the number of “completed years without contributions to the state pension scheme.” In the following table, we have calculated this for 5, 10, 20, 30, and 45 years (… as self-employed without pension contributions):
| Years * | Pension Insurance Contribution Rate (2024) | Average Salary according to Table (2024) | Uncounted Assets |
|---|---|---|---|
| 5 | 18.6 % | 45,358 EUR | 42,183 EUR |
| 10 | 18.6 % | 45,358 EUR | 84,366 EUR |
| 20 | 18.6 % | 45,358 EUR | 168,732 EUR |
| 30 | 18.6 % | 45,358 EUR | 253,098 EUR |
| 45 | 18.6 % | 45,358 EUR | 379,646 EUR |
One could also say: For each completed year under the conditions described above, 45,358 EUR x 18.5% = 8,436.59 EUR are allowed as uncounted assets.
Requirements
Here again are the requirements for assets that are not counted for citizen’s income:
- This is not about the protected assets of 40,000 EUR in the first year and 15,000 EUR in subsequent years, but about amounts that are not considered at all. These 40 or 15 thousand EUR would therefore be “on top,” as additionally protected assets, after the uncounted assets discussed here are deducted from the total assets.
- Also “on top” according to the legal text would be “a self-used house property with a living area of up to 140 square meters or a self-used condominium of up to 130 square meters”. Such a property would therefore – additionally – not be counted.
- An appropriate car would also not be counted, with one car for each employable person in the benefit community. Appropriateness is “presumed when the applicant declares this in the application,” according to the legal text.
- According to the legal text, “assets, regardless of the form of investment” are involved: Thus, you can hold these assets in cash, stocks, ETFs, gold, bonds, rented real estate, or otherwise.
- According to the legal text, these are assets “designated as intended for retirement”: It is enough to declare these assets as reserves for your retirement. As mentioned, the money does not need to be tied to Riester, Rürup, or similar.