By 2040, 13.3 million members of the labour force in Germany will reach the statutory retirement age. That corresponds to around 30% of the labour force that was available to the labour market in 2025. These are people who work today, pay contributions and keep companies running, and who will later make claims on the next generation. Demographic change is therefore often treated too narrowly as a pension issue. Statutory pensions are at the centre, but the consequences reach further. Fewer members of the labour force change the relationship between the wage bill and social spending, intensify competition for workers and increase pressure on public finances and private retirement provision.
30% of the labour force will reach retirement age
The Federal Statistical Office published the figure on 23 June 2026. By 2040, around 13.3 million members of the labour force will have passed the statutory retirement age of 67. That is 30.0% of all members of the labour force who were available to the labour market in 2025. The figure does not mean that everyone affected will leave their job on their 67th birthday. People can work longer, leave earlier or stop working for other reasons. The figure does show the scale of the cohorts that will grow out of the typical working age over the next 15 years.
The cohorts just before retirement are particularly large. According to Destatis, 4.5 million people between the ages of 60 and 64 were still employed in 2025. The 55-to-59 age group was even the largest, with 5.5 million members of the labour force. Together, the two cohorts comprise 10.0 million people. Younger age groups are smaller in number and therefore cannot fully replace these cohorts on the labour market.
For Destatis, this is an if-then scenario based on assumptions about births, life expectancy and migration. The transition of the baby boomers into retirement, however, is already built in. Births that did not take place decades ago cannot be made up in the short term. Immigration and a higher labour-force participation rate can mitigate the consequences, but they cannot reverse the age structure of the coming years.
Pensions are paid from current income
The statutory pension insurance system operates predominantly on a pay-as-you-go basis. Employees’ contributions are not fully saved and invested for their own retirement; instead, they finance the pensions of today’s generation. In return, all contributors later receive entitlements, which are then financed from the contributions and tax funds of the next generation.
If the number of members of the labour force grows more slowly than the number of pensioners, pressure builds in the system. Higher wages can increase contribution revenue per employee, and productivity gains can make more value creation possible with fewer working hours, while immigration can increase the number of contributors. None of these developments is free or can be brought about by political decree.
The state can stabilise the pension level with higher contributions, larger tax subsidies, a higher retirement age or lower entitlements, but each option distributes the burden differently. Higher contributions make labour more expensive, while tax subsidies take money away from other tasks or increase debt. A later retirement age extends the working phase, and lower benefits primarily affect people who have no other returns or additional income in old age.
The Bundesbank expects growing deficits in the social-security systems for 2026 and 2027. Among other things, it cites rising expenditure on pensions, healthcare and long-term care, which is increasing more strongly than contribution-based earnings. The demographic shift has therefore already reached public cash flows. It is not waiting until 2040; it is building up through the next budgets.
Fewer workers are changing the economy
The consequences of demographic change do not only appear on the contributors’ side: when many experienced employees leave the labour market at the same time, companies have to redistribute tasks. Wages can rise in individual areas where staff are scarce. This improves the bargaining position of certain employees, but also increases costs for companies and public institutions.
Productivity will therefore become more important: automation, better organisation and technical tools can partly replace missing working hours. In care, skilled trades, construction and many services, however, this is possible only to a limited extent. A machine can support processes, but it cannot take over every human activity.
Demand is also changing: according to the current population projection by Destatis, the number of people aged 67 and over is expected to rise from 16.7 million to at least 20.1 million by the middle of the 2030s. This affects healthcare, long-term care, housing, mobility and consumption. Companies face opportunities and costs as a result, but no automatic return.
For the stock market, what ultimately counts is the connection between revenue, costs, productivity and capital requirements. Demographics can strengthen an industry while also putting pressure on its profit margin. Spending on care can rise while staff are lacking and financing the services becomes more difficult.
Demography is also a question of ownership
Anyone who relies exclusively on earned income and state transfers in old age directly bears the consequences of political adjustments. If contributions rise, disposable income falls. If taxes rise, less remains for building personal wealth. If retirement age is pushed back, the period during which current income must be earned becomes longer.
Ownership of productive assets can create an additional source of income. In principle, this includes stakes in companies and other asset classes that can generate returns over the long term. This is no guarantee against price fluctuations and does not replace a liquidity reserve, but it clearly changes one’s starting position: alongside a claim to a state pension, one also owns assets.
This distinction is often missing from the debate: a state promise is a claim against a political and financial system. A securities account is ownership whose value fluctuates and whose returns are not guaranteed. Both involve risks. Anyone who equates the two understands neither pensions nor the capital market properly.
What political answers remain?
Politics cannot solve the problem by merely turning individual levers. A higher tax subsidy does relieve contributors, but it burdens the federal budget. A higher retirement age increases the number of contribution years, but it particularly affects people in physically demanding occupations. More immigration can expand the labour supply, but it requires integration and employment.
For private households, the uncomfortable consequence remains: the state can distribute the demographic bill, but it cannot make it disappear. Anyone who wants to build part of their own protection needs time and a structure that fits their income and later needs. Anyone who builds wealth over the long term creates their own pool of capital alongside claims on the state and the labour market. They gain more independence. Independence from the state and from others.
