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Personal finance  |  October 23, 2012 09:23:32

The higher the income, the lower income

With increasing income reduces the ratio between the income and achieved income before retirement. With increasing income is therefore indispensable to save and invest more for retirement, since retirement significantly decreases quality of life.

Retirement standard of living decreases. Citizens with average and above-average income, more than people with below-average wages. Already having average citizens must therefore pay as soon as possible to take responsibility for lifestyle in retirement into their own hands. Own savings and investment is an absolute necessity.

Change in the calculation of the reduction does not remove

In the coming years, the pension calculation is slightly changed. Reduction in the pension calculation will continue to be maintained. It was due to reduction when incomes above a certain threshold increase pension of just a percentage, is the reason why people with higher incomes have a relatively low income and low-income citizens relatively high income.

Read "The board is waiting for you 120% increase in spending on health care"

A practical example

The attached table to calculate personal income for individual bases in gaining 41 years of insurance. Personal assessment base is simply the average monthly wage in the present value, where former earnings are multiplied by a factor taking into account inflation. Individuals who have had a lifetime relatively equally high wages, they can count on to simplify the current monthly wage. All calculations are provedey according to the legislation in 2012, the calculation in the next year will bring little change.

The amount of pension, depending on income (according to the legislation in 2012)

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Personal assessment

basis PADDING-TOP: 0px "vAlign = center align = middle> Period of insurance Monthly pension


income / gross wage 10 000 CZK 41 years 8420 CZK 84.2% 15 000 CZK 41 years 9751 CZK 65.0% 20 000 CZK 41 years 10 612 CZK 53.1% 25 000 CZK 41 years 11 473 CZK 45.9% 30 000 CZK 41 years 12 273 CZK 40.9% 40 000 CZK 41 years 13 257 CZK 33.1% 50 000 CZK 41 years 14 241 CZK 28.5% 60 000 CZK 41 years 15 225 CZK 25.4% 70 000 CZK 41 years 16 209 CZK 23.2%

author's own calculations

As can be seen from the accompanying table, and with growing income decreases the ratio between the income and the gross wage.More accurate would be to compare income and net salary as pension shall be taxable only rarely (in these cases, no income is not taxed), while the gross wage is needed to pay social and health insurance contributions and income tax. Taxation, however, for all citizens of varies depending on the application of tax credits or the use of non-taxable items. However, the result would be the same, low-income citizens have a relatively high income and high-income citizens have a relatively low income. Therefore, to simplify comparing gross salary and pension.

Read "The board is waiting for you 120% increase in spending on health care"

All changes will strengthen ownership

All developed countries in the world are currently faced with demographic changes, which extends life expectancy and declining birth rates. Citizens therefore receive a pension for longer than in the past and at the same time decreasing the ratio between workers and retirees. All legislative changes will therefore mean a noticeable decline in state pensions. As can be seen from the accompanying table, the replacement ratio (pension versus gross salary) begins to decline significantly longer when receiving 20 000 CZK, which is approximately the median wage. Already having income citizens on the border of the median wage would have time to think about security in retirement.

A good advisor is worth

Ways to provide for their retirement, are numerous. It depends on personal preferences, acceptance of risk, and other factors. Because financial security in retirement is a long, so definitely worth working with a good financial adviser. Savings and investments may change over time, for example, depending on the length of investment or change in our investment strategy. Regular consultations with a good financial advisor are ways to beat inflation and really appreciate their savings and investments. Life in retirement is not without its own funds in the future definitely simple.Additionally, saved up their own financial reserve is a way to be able to retire before reaching retirement age, which is significantly extended. For people born in 1977 (women regardless of the number of children) will be able to go to a proper pension, in 67 years.

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