Investing with maximum government benefits

What's the best way to invest your money? 🤔 In this blog post, we show you how you can invest with the maximum government benefits you can receive in Germany.

Key Takeaways

  • In the first place, it is important that you at least repay the high-interest loans that are higher than the expected returns.
  • Secondly, you should set up an emergency fund in a standard account, a flexible savings account, or a fixed-term savings account.
  • To receive additional payments from the government or your employer, you can invest in a company pension or a Riester pension.
  • To obtain tax benefits or tax-deductible contributions, you can invest in pensions, in an investment account, or in real estate.


What is the best way to invest in Germany? Great question! One way to answer it is to look at where your money can receive the highest return from outside sources – such as via employer contributions, or government tax benefits, because the returns are guaranteed.

Let’s take a look at the costs and benefits of the different ways you can invest in Germany, and analyze which is most attractive – from real estate to pensions, stocks, and even considering paying back loans. With these tricks can you invest with maximum government benefits.

1st: Get rid of high-interest loans

First things first. Before investing a single euro, it is an important need to ensure that you pay back any high-interest loans – at least for those with interest rates that are higher than the returns you might expect on other investments.

Payday loans or credit card debt are common examples. A mortgage is an obvious exception. If you are unable to pay them soon quickly, a second-best option would be to consolidate them into a single loan with a low-interest rate. Consumer loans with less than 2% interest are currently available – check them out here.

2nd: Establish an emergency fund

A shocking 30 million Germans could not afford an unexpected expense of 1.000€. While it’s great to want to invest, you must ensure you have a pot of money to handle anything life throws at you, otherwise, you will have to go into debt to deal with the expense – and then you’re back at point 1 with high-interest debt. There are 3 options to establish an emergency fund:

  • Standard Bank Account: Get a standard bank account that pays high interest (if you are financially responsible and don’t spend it!), you will typically get just over 2% interest here, and there are several options to choose from.
  • Flexible Savings Account: Alternatively, a flexible savings account can offer up to 2,4% interest. Again, you can view the options on our website.
  • Fixed-Term Savings Account: A fixed-term savings account will pay up to 4,5% interest, although you will usually lose the interest if you make a withdrawal during the period in question – the options are here.

3rd: Invest in Pensions

Company Pension Level 2

Company pensions can be an excellent place to start our investment journey. They offer up to four different types of benefits, depending on your employer. Contributions are free of social security up to 292€/month, and free of income tax up to 584€/month. You will also get an employer match – for companies in Germany, a 15% match is mandatory.

And of course, like, all pensions, the growth of the investments is tax-free. You only pay taxes once you take the money out of the pension. The problem with company pensions is that many are invested very conservatively, with low growth potential. Company pensions also may not be transferable between employers, as there are five different types.

Riester Pension Level 2

Not everyone can access the Riester pension, but you will get the same tax benefits as for the company pension, including 2.100€/year of tax-deductible contributions and tax-free growth of investments.

The Riester pension also gets a bonus of 175€/year for adults and 300€/year for each child. So, for families with children, the Riester pension can be an attractive option.

Rürup (Base) Pension Level 1

If you are looking for more tax benefits than the Riester pension, the Rürup pension is attractive. You can make 25.639€ per year of tax-free contributions.

If you have a taxable income of more than 62.810€ per year, you are paying 42% tax, and make the maximum contribution to your base pension, you will get tax benefits of 10.786€. That is an unbeatable return, and of course, your investments grow tax-free as well.

Private Pension Level 3

Unlike levels 1 and 2, the government will not give you tax benefits during the pay-in phase on your level 3 private pension contributions.

Instead, you will get the tax benefits when withdrawing the money. You can read more about this on our page about the German private pension. And as before, the money will grow tax-free while it is in the pension. 

4th: Investment Account

Good news for German investors: The government increased the tax-free capital gains allowance to 1.000€ in 2023. While not comparable to pensions, this is still a nice perk. And it applies to everyone.

Meaning if you put an investment account in your child’s name, they will benefit from the 1.000€ exemption as well. You can look up the most attractive investment accounts for your personal situation on our website.

“Depending on the age that you like to retire, private pensions can save you tens of thousands of Euros in taxes compared to regular investment accounts thanks to tax-deferred growth.

5th: Real estate investment

Real estate investing is one of the most attractive investment opportunities in Germany. If done right, you won’t just get tax deductions but will pay zero tax or social security contributions. All your costs can be set against profitsinterest paid to the bank, property management fees, cost of maintenance and renovations and depreciation are all offset.

In particular, the fact that depreciation is a non-cash expense, but generates a tax loss, together with the reality that property rises in value over time, means that we can make a financial profit without paying tax on it.


You do not have to follow the order described above, nor do you have to invest in all of them, but we hope that we have been able to show you how efficiently you can invest in Germany.

To discuss all this in detail, please feel free to contact us for a free meeting. We will then create an individual strategy and investment plan for you and answer all your questions.

1 thought on “Investing With Maximum Government Benefits”

  1. Pingback: Is Riester Pension Right For You? Exploring Bonuses and Tax Benefits

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