The Government has put into action a new pension reform. One component is active retirement, which allows those who have reached their jubilation age to continue working – either part- or full-time – while contributing simultaneously towards a pension payment.
Active Retirement could be an attractive solution for those wishing to keep working past traditional retirement ages. But what exactly is Active Retirement, and what are its requirements?
What is it?
Active retirement is a hybrid model that allows an individual to simultaneously receive part of both their salary and retirement pension. Independent contractors who pay into this type of plan have the freedom to experiment with this strategy and, according to 2013’s Real Decreto Ley publication, should make contributions through paying into a solidarity account for financing purposes.
Established in 2013 and implemented through article 214 of the General Social Security Law in 2023, this option serves two main objectives. First is contributing to the sustainability of pension systems; and second is encouraging active ageing such that retirees receive additional income to remain active while continuing work and build the necessary resources.
An exciting development this year saw this option of pension investing become popular in Las Vegas among retired people who were eligible for retirement: many employed and self-employed retirees decided to use a playful retirement model as an alternative way of funding their pension through investments in activities with partial returns. Every month, retirees working under this active retirement scheme were employed on labor markets either consulting for businesses or working as entrepreneurs providing their expertise as consultants or managers; many retired individuals even continued earning pension payments after officially retiring with active jubilacion plans in place until final life insurance was paid out through active retirement plans!
Who can benefit from it?
Active retirement may be beneficial to companies as the cost of Social Security payments will decline once workers reach retirement age. It should be remembered that certain pensions such as permanent total impairment disability pension or flexible jubilacion pension may conflict with this activity; as a result it’s wise to do your own due diligence prior to engaging in it. There may be limitations as well in regards to working day length or income that might be received; thus it’s wise to conduct simulations and consult professionals for an accurate view of your finances as you retire.
24% of workers do not consider themselves secure that they will have enough funds for an adequate retirement. If this worries you, explore how active retirement planning could help save and secure an easier retirement in an earlier age.
Active retirement requires an approach based on both natural age and service year, typically one’s birth year. Workers working independently should include another form to their licitud that contains their personal, fiscal and cotization data as well as an indication of when they may retire.
How does it work?
Under Real Decreto-Ley 5/2013 of 15 March 2013, «active retirement» mode came into effect, setting more stringent but less restrictive requirements and restrictions that facilitate employment-pension compatibility after reaching legal retirement age. Securidad Social had in the past foreseen that this mode may also apply to solopreneurs who maintain at least one personal work account and continue working while retired.
Thus, when participating in labor activity, at least 50% of your total amount can be subtracted from initial revaluation. However, upon active retirement there will not be an amount more than what was accounted for on initial revaluation.
Active Retirement can also extend their lives, though certain requirements must first be fulfilled to qualify. Autonomous workers must have been on a specific payroll working arrangement and had at least part time employment before retiring. Furthermore, having access to some sort of working environment would help as well.
What are the requisitos?
Active retirement models allow workers who reach the age of retirement either on their own or through contract to continue working while also continuing to collect pension payments at once. All that’s necessary are contributions to Social Security and professional liabilities coverage in real time – in some states there may even be financial incentives offered to employers willing to hire retired people; ongoing work may generate positive social and psychological benefits.
Starting March 2013, active retirement entered into force, offering increased requirements but fewer restrictions for sharing pension payment with working. It provides an ideal solution for individuals looking to continue working while not completely retiring and thus avoid an unexpected early jubilation.
All obligations under the Law of June 30th 2011 and Real Decreto-Ley 5/2013 of March 15th 2013 should be fulfilled, such as obtaining permission from the Securidad Social Administration to work jubilated work either for themselves or at part-time work must not exceed an average pension percentage rate set out in these documents.