How Does Altersteilzeit Work in 2026 as a Transition to Retirement?
Partial retirement (Altersteilzeit / ATZ) allows older employees in Germany to transition smoothly from work life into retirement. Since federal subsidies ended in 2009, partial retirement is governed entirely by collective agreements (Tarifverträge) or individual contracts between the employer and employee. The legal framework remains the Altersteilzeitgesetz (AltTZG).
For detailed calculations, you can use our free partial retirement calculator.
In this article, we compare the two primary models of partial retirement – the block model (Blockmodell) and the part-time model (Teilzeitmodell) – and show how the choice affects your net income and subsequent pension.
What Are the Requirements for Altersteilzeit?
To qualify for partial retirement, several basic conditions must be met:
- Minimum Age: Typically starting at age 55, though collective agreements may specify a different age.
- Prior Employment: At least 1,080 calendar days (approx. 3 years) of social insurance-paying employment in Germany within the last 5 years before starting ATZ.
- Agreement: Partial retirement must be mutually agreed – there is no general statutory right to it.
- Halving of Work Hours: Weekly working hours must be reduced to half of your previous average.
What Are the Two Models of Altersteilzeit?
How Does the Part-Time Model (Teilzeitmodell) Work?
In the part-time model, you work reduced hours throughout the entire partial retirement period. For example, if you previously worked 40 hours per week, you now work 20 hours per week for the entire duration.
Pros:
- Gentle transition: You stay active in the workforce until retirement.
- Social contacts and daily routine are maintained.
- Further training and professional qualifications remain possible.
Cons:
- You work right up to retirement – no early release.
- Less flexibility for travel or personal hobbies during the final years.
How Does the Block Model (Blockmodell) Work?
The block model is the most popular option in Germany (accounting for approx. 90% of ATZ agreements). The partial retirement period is split into two equal blocks:
- Active Phase (Arbeitsphase): You continue to work full-time, but receive only the partial retirement salary (half pay plus the employer's top-up).
- Passive Phase (Freistellungsphase): You do not work at all, but continue to receive the same partial retirement salary. The excess hours worked in the active phase are paid out as a credit during this time.
Pros:
- Early exit from the workforce – often 2 to 3 years earlier.
- Steady cash flow until regular pension age.
- High predictability for the transition into retirement.
Cons:
- Insolvency risk: The accumulated credit must be secured against employer insolvency (§ 8a AltTZG).
- No flexible return once the passive phase has commenced.
How Much Are the Employer Top-Ups (Aufstockungsbeträge)?
Under the AltTZG, the employer is legally obligated to top up your partial retirement salary:
- Salary Top-Up (Entgeltaufstockung): At least 20% of your partial retirement salary. In many collective agreements, this top-up is much higher, ensuring you receive 80% to 83% of your former full-time net salary.
- Additional Pension Contributions: The employer must pay additional pension contributions (Rentenversicherungsbeiträge) amounting to at least 80% of the pension contributions for the lost salary (capped at the contribution ceiling).
Important: These top-up amounts (Aufstockungsbeträge) are tax-free in Germany, but are subject to the progression clause (Progressionsvorbehalt), meaning they can increase the tax rate on your other taxable income.
Example Net Income Comparison
Assumptions: Employee, age 58, previous gross salary 4,000 €/month, tax class III, no church tax, partial retirement over 4 years (2 years active + 2 years passive for the block model). Top-up to 83% of former net salary (standard collective agreement). Values are rounded approximations:
| Feature | Full-Time (Before) | Part-Time Model | Block Model |
|---|---|---|---|
| Gross Salary | 4,000 € | 2,000 € | 2,000 € |
| Top-Up (Tax-Free) | - | approx. 510 € | approx. 510 € |
| Net Salary (approx.) | approx. 2,850 € | approx. 1,575 € | approx. 1,575 € |
| Net + Top-Up | approx. 2,850 € | approx. 2,085 € | approx. 2,085 € |
| % of Full-Time Net | 100 % | approx. 73 % | approx. 73 % |
What Impact Does Altersteilzeit Have on Your Pension?
A common concern is the reduction in pension. Here are the key facts:
- Employer Top-Ups to Pension: The employer pays pension contributions based on 80% of your lost income. This mitigates most of the pension loss.
- Typical Pension Reduction: For a 4-year partial retirement, your future pension is typically reduced by only 4% to 8% compared to working full-time.
- Insolvency Protection: For the block model, ensuring your employer has set up insolvency protection (§ 8a AltTZG) for your working credit is crucial. Make sure you check this before signing!
Sources: Altersteilzeitgesetz (AltTZG), § 3 Nr. 28 EStG, Deutsche Rentenversicherung, Federal Employment Agency, as of 2026.