Drawdown plan to 85: what happens after age 85?

Tilman Freyenhagen

Published on 25 July 2026 · Updated on 7 August 2026 · Managing Director & Partner, Alsterspree Verlag GmbH

Basic principle of the payout phase in the Altersvorsorgedepot

Under the pension reform, savers get flexible payout options for their Altersvorsorgedepot from age 65. If you choose a fixed-term drawdown plan, it runs within the statutory rules. Once the drawdown plan ends, the saved assets have, as planned, been used up, so no further monthly payments come from that contract; as protection against longevity risk, the classic lifelong life annuity is available as an alternative.

The two main models under the statutory framework

When you enter the payout phase, you decide how the capital you have saved is used for your retirement. The law essentially distinguishes between two routes, which place different emphasis on estate protection and pension guarantees:

• Lifelong life annuity: at the start of the payout, the account capital is converted, in full or at least 80 percent, into a lifelong pension payment that is guaranteed to continue until the end of your life.
• Fixed-term drawdown plan: the capital stays in the account and is paid out in monthly instalments until at least age 85. Any balance not yet paid out remains inheritable during the term.
• Combination models: part of the capital can remain invested for returns, generating flexible additional income alongside a basic pension.

Choosing the right model sets the course for your financial security at a very advanced age. While the lifelong pension secures your livelihood until the end of your life, the drawdown plan offers maximum flexibility and inheritability during its term, but requires forward-looking planning for the time after your 85th birthday.

How the drawdown plan works until age 85

In the Altersvorsorgedepot, the statutory drawdown plan combines scheduled monthly liquidity with ongoing return potential on the capital markets. Statutory rules require a fixed-term drawdown plan to run until at least your 85th birthday. Compared with a rigid annuity insurance policy, assets not immediately needed stay invested in return-oriented vehicles such as ETFs or investment funds. Investors thereby keep full flexibility over their payout options, while the account assets can continue working through retirement.

The monthly withdrawal amount is calculated using a dynamic distribution method set out in the statutory framework. At the start of the payout phase, and then at least every three years, the provider resets the payout amount. At each reset, at least 80 percent of the account capital remaining on that date is spread evenly across the remaining months until age 85.

• Safety margin through partial investment: the remaining up to 20 percent of the balance stays in the account for the time being. It continues to earn returns on the capital markets and cushions interim price fluctuations.
• Regular value adjustment: through the periodic review every one to three years, market gains or account declines are worked directly into future instalments.
• Final payment of remaining capital: if a balance is still left in the account when you turn 85, it is paid out to you together with the last monthly instalment.

This structure ensures that retirement assets are not used up prematurely, while still capturing market opportunities. Should the saver die before reaching age 85, the remaining balance is not forfeited but passes to their heirs. (Note: all calculations and model logic serve solely to illustrate the statutory rules and do not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)

The longevity question: what happens after your 85th birthday?

The reform concept behind the Altersvorsorgedepot brings a major change to the withdrawal phase: the previous requirement to annuitise for life is dropped, so savers can draw down their balance in a structured way through a fixed-term drawdown plan. That raises a pressing question for many retirees and their families: what happens to the monthly income once that date is reached and the account assets have, on paper, been fully used up?

Longevity risk and the three routes after age 85

If the saved capital lasts exactly until age 85 and is drawn down in full as planned, payments from the Altersvorsorgedepot simply stop at that point, with no replacement. To protect against your personal longevity risk, you generally have three procedural routes to choose from when selecting your payout options:

• Pure capital drawdown to 85: the entire account balance is paid out in full by your 85th birthday. After that, no further payments are made from the Altersvorsorgedepot. From this point on, financial security at a very advanced age rests solely on the statutory pension or other private income.
• Follow-on life annuity / partial annuitisation: part of the capital is set aside at the start of the withdrawal phase to fund an annuity insurance policy that guarantees a lifelong monthly follow-on pension only from age 85.
• Lifelong annuitisation from the start: the balance is converted in full into a classic lifelong life annuity as soon as you retire, covering longevity risk seamlessly from day one.

If the drawdown plan is set up flexibly and unused capital remains in the account on your 85th birthday, that remaining balance continues to be paid out, or passes to your heirs if you die. We recommend that savers approaching retirement carefully weigh their personal life expectancy against their likely basic needs at a very advanced age already when setting up the drawdown plan.

Follow-on protection and residual annuitisation as risk cover

A fixed-term drawdown plan in the Altersvorsorgedepot offers a high degree of flexibility and lets you keep capturing capital-market opportunities. To systematically cover longevity risk — the risk of living longer than the agreed term of the drawdown plan — savers have several routes open to them. The statutory framework makes it possible to reach a very advanced age without a gap in your income.

Options for covering longevity risk

• Immediate annuitisation at the start of retirement: the account balance at the start of the payout phase can be converted, in full or at least 80 percent, into a lifelong life annuity that guarantees income until the end of your life.
• Buying a follow-on life annuity: if you choose a fixed-term drawdown plan, part of the capital can be set aside for a deferred annuity insurance policy. This pays out a lifelong pension from age 85, closing the gap in time.
• Payout of remaining capital: if the drawdown plan runs its course to your 85th birthday as planned, any remaining capital is paid out to the saver together with the last instalment.

Which model suits you best depends on your personal preferences: while a life annuity offers maximum security, the drawdown plan keeps the advantage of inheritability of unused balance before age 85. You'll find a comprehensive overview of the contractual design options in our article on the statutory payout options for the Altersvorsorgedepot.

Inheritability of remaining capital and special tax rules

If the account holder dies during the payout phase, the balance remaining in the drawdown plan is not lost but generally becomes part of the estate. Unlike with a lifelong life annuity, the account capital saved up to that point does not, on death, revert to the pool of insured policyholders. However, the tax and subsidy treatment differs strictly depending on whether the transfer goes to a spouse or the estate passes to other people. Structuring your chosen payout options with foresight protects your survivors from unexpected tax clawbacks.

Transfer to a spouse compared with other heirs

If the remaining account capital is transferred on death to a subsidised retirement-provision contract held in the surviving spouse's name, the state subsidy is retained in full. The law classifies this as not detrimental to subsidy status, so neither the allowances nor the special-expense deductions granted have to be repaid. If the remaining capital instead passes to children, grandchildren or third parties, the tax authorities treat the payout as detrimental use. In that case, the tax and subsidy consequences for the benefits granted during the accumulation and payout phase must be taken into account. The heirs are left with only the own contributions plus the investment returns generated, which are additionally subject to regular inheritance tax.

For legally sound estate planning around the Altersvorsorgedepot, early coordination within the family is therefore advisable. Couples should make sure, before the withdrawal phase begins, that the surviving partner has a suitable contract in place so that the tax-free transfer of the remaining capital on death can proceed without delay. For other heirs, it's worth factoring in that only the net value, after deducting the subsidy portion, reaches the estate.

Drawdown plan compared with the classic lifelong life annuity

Under the new rules on private retirement provision, you face a key decision for your retirement planning at the start of the payout phase. You can either draw down the capital you've built up in the Altersvorsorgedepot through a fixed-term drawdown plan, or convert it into a classic lifelong life annuity. The two payout options behave fundamentally differently in terms of return potential, access to capital, inheritability and protection against a very advanced age.

Return potential, inheritability and the risk of drawing down your capital

The drawdown plan offers savers approaching retirement noticeable return potential, since the remaining assets stay invested in the capital markets during the withdrawal phase and can keep generating returns. Flexibility is also preserved: if the account holder dies during the term of the drawdown plan, the remaining capital can be inherited by their survivors, or transferred to the spouse's Altersvorsorgedepot without deductions detrimental to subsidy status. The downside lies in the payments running out: once the contract ends at your 85th birthday, the balance has, as planned, been used up, so no further monthly instalments flow from the account.

By comparison, the classic life annuity provides a guaranteed monthly source of income that is paid out until death, regardless of how old you get. However, this protection against longevity risk often comes with lower monthly payout amounts, because insurers apply cautious mortality tables and safety margins. Which model suits your situation depends largely on your other income in old age and your wishes for estate planning. (Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)

Preparing for retirement and options for switching

The transition from the accumulation phase to the payout phase is a decisive fork in the road for your long-term security in old age. Immediately before retirement actually begins, savers have the statutory right to transfer their accumulated retirement assets to a new provider without losing the state allowances and tax advantages they've received. Such a switch offers the chance to move, before payouts begin, to a provider with lower account fees or more favourable terms for the drawdown plan. Anyone who wants to switch provider in good time before retirement should compare the switching arrangements and deadlines of the respective providers early on.

Steps for working out the right withdrawal strategy

1. Analysing your total capital: determine exactly how much retirement wealth you've saved, and set the desired start of the payout phase.
2. Comparing payout forms: weigh up a fixed lifelong life annuity against a more flexible drawdown plan running to age 85.
3. Calculating the withdrawal rate: model the monthly payout amounts, taking account of account fees and remaining capital-market returns.
4. Protecting your survivors: assess the inheritability of the remaining assets in the event of death during the term of the drawdown plan.

Digital calculation models help you prepare for this decision by transparently illustrating different withdrawal paths. These calculators work out precisely how the capital remaining in the Altersvorsorgedepot can develop dynamically during the withdrawal phase. That lets prospective retirees see exactly what monthly pension amount is realistically achievable for their chosen term. Transparent simulations therefore provide the foundation you need to structure your own retirement provision around the payout phase. All calculations and illustrations serve general information purposes and do not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

Conclusion and guidance for your individual retirement decision

In the withdrawal phase, the new Altersvorsorgedepot offers markedly more flexibility than the previous system. While a drawdown plan captures the capital markets' return potential, the later payout phase requires forward-looking planning. Anyone who wants to cover longevity risk without gaps should engage early with the legal and financial payout options.

• Planning certainty to 85: the fixed-term drawdown plan allows flexible monthly instalments and keeps the remaining assets in the account, but ends as planned once you turn 85.
• Lifelong protection: choosing annuitisation or a follow-on life annuity guarantees regular payments until the end of your life, but reduces the inheritable remaining capital.
• Weighing it up individually: the right model for you depends on your health, your other income in old age, and whether you want to plan your estate.

You have two equally valid routes for putting this decision into practice: digital self-deciders compare offers independently and use tools such as the subsidy calculator, while savers who want guidance can bring in personal specialist advice through our independent advice service. Through our knowledge section, we support you transparently and with sourced information at every step of your retirement provision.