For the youngest generations, saving for retirement isn’t at the top of the agenda. But in Germany, youngsters are getting a leg up from the government to begin putting cash away for later in life.
The country’s new government plans to roll out an “early start pension,” giving children as young as 6 a head start on retirement savings. Under the proposal, students aged 6 to 18 who are in school would receive 10 euros—about $11—each month from the government. Over 12 years, this would total 1,440 euros per child, not including any additional gains from investing the funds.
When they reach 18 years, account holders will be able to add in their own funds, subject to annual limits. The profit will be tax-free until retirement, when the money becomes accessible. Germany’s current retirement age is 67—and could increase in the future—meaning these savings could grow over more than 60 years.
While relatively speaking in the scope of saving for retirement, 1,440 euros is a relatively small sum—but when interest comes into the mix, there are potentially large gains to be made by the time retirement comes around.
“The idea is very forward-thinking,” said Aaron Cirksena, founder and CEO of MDRN Capital. “Especially in a world where I believe time is your biggest asset.”
Indeed, time is the key ingredient behind the idea—the financial snowball effect where early, steady savings can yield exponential gains over time, and starting in childhood gives that snowball a massive head start. According to Cirksena, the long-term benefits of such a policy could be transformative.
“The positives could be huge…a shift toward long-term planning for a whole generation.”
“The risks are also very real,” Cirksena warned. “If the funds are mismanaged or politically steered, you’re setting up a system that could easily lose the trust of the public. Plus, if families can’t contribute regularly, it might widen the wealth gap rather than close it.”
This concern becomes even more pressing when imagining a similar system in the U.S. Millions of Americans—particularly gig economy workers and low-income families—already struggle to save for retirement. Without strong government support, a U.S. version of the early start pension could reinforce existing disparities.
“For this to work in the U.S., there’d need to be automatic contributions or government matching,” Cirksena explained. “Otherwise, it just becomes another plan only the financially stable can benefit from.”
Still, the long-term appeal is certainly enticing. With Social Security under strain and Americans living longer, a supplemental, privately funded retirement system could reduce reliance on public benefits—if designed well and made widely accessible.
“In theory, a funded system could relieve some future burden by creating personal retirement wealth that doesn’t rely on Social Security,” Cirksena said. “But it takes decades to see that impact.
“It’s not a replacement, but it might be a smart layer on top if done right.”
As it stands, there is no similar program for young people to get saving early for retirement in the U.S. But some lawmakers want to make building a nest egg easier.
In May, Texas Senator Ted Cruz introduced the Invest America Act, which would establish a private tax-advantaged account with a $1,000 seed investment from the federal government for every American child when they are born.
Cruz said the change would “trigger fundamental and transformative changes for the financial security and personal freedoms of American citizens for generations.”
“Every child in America will have private investment accounts that will compound over their lives, enhancing the prosperity and economic participation of the vast majority of Americans,” he said in a statement. “When people years from now talk about the changes created by Republican efforts this Congress, this is one of the landmark achievements they will talk about.”
Read the full article here
