Quick answer
The average Lithuanian can withdraw €5,000-15,000 from their second pension pillar during the 2026-2027 transition period (personal contributions only, not state incentives). According to WHEELSTREET data, this is enough for a reliable 5-8 year old car — but withdrawing may reduce your future pension by €30-80/month, so compare the opportunity cost carefully.
From January 2026, a historic transitional period began in Lithuania -- residents can opt out of the second pension pillar and withdraw part of their accumulated funds. Many are considering this option as a way to buy a car. But is it a smart financial decision? In this article, we analyse all aspects in detail.
What Changed From 2026?
Illustration: What Changed From 2026?
The pension accumulation system has undergone fundamental changes. Previously, residents were automatically enrolled in pension accumulation, and funds could only be withdrawn upon reaching retirement age. Now the situation is radically different.
Key changes:
The transitional period lasts two years -- from January 1, 2026 to December 31, 2027. During this time, every participant can decide to opt out without any additional conditions or restrictions. This means that even if you have been saving for 15 or 20 years, you can withdraw your personal contributions and investment returns.
It is important to understand that you will not receive the full amount accumulated in the pension fund. State incentive contributions and Sodra contributions (if you were saving before 2019) will be transferred back to Sodra and converted into additional pension accounting units. In practice, this means your future Sodra pension will increase slightly.
How Much Can You Actually Withdraw?
Calculating the exact amount is not difficult, but you need to know your figures.
Example: If the pension fund has accumulated EUR 15,000, of which EUR 4,000 consists of state incentive contributions and Sodra contributions, EUR 11,000 will be transferred to your account. The remaining EUR 4,000 "returns" to Sodra and will increase your future pension.
You can check your figures by logging into the Sodra personal account at gyventojai.sodra.lt. There you will see:
- Total amount accumulated in the pension fund
- Your personal contributions
- State incentive contributions
- Sodra contribution portion (if you were saving before 2019)
Important: In 2026, the lump-sum payment threshold has been raised to EUR 16,785. If the accumulated amount does not reach this threshold, you can withdraw everything as a lump sum without a mandatory annuity.
The 25% Partial Withdrawal Option
Even if you do not want to fully opt out of pension accumulation, you have another choice -- withdraw up to 25% of the accumulated funds once during the entire accumulation period.
What you need to know:
The withdrawn amount cannot exceed your own personal contributions. For example, if the fund has accumulated EUR 20,000, and your personal contributions amount to EUR 8,000, you can withdraw not EUR 5,000 (25% of EUR 20,000), but only up to EUR 8,000.
If you have not reached retirement age, a 3% fee will be deducted from the withdrawn amount, going to Sodra. So if you withdraw EUR 5,000, you will receive EUR 4,850 in hand.
Those who have reached retirement age do not pay the 3% deduction.
Buying a Car With Pension Funds: Advantages
Key advantages and disadvantages
Now let's move to the practical side -- is it worth spending these funds on a car?
Arguments in favour:
First, if your current car is unsafe, old, or constantly requires repairs, investing in a new or reliable used car can be justified. Road safety is priceless -- in 2024, 123 people died in traffic accidents in Lithuania, with more than 3,200 injured. Modern cars with advanced safety systems can save lives.
Second, if you use the car for work and it directly affects your income, the investment may pay off faster than pension fund returns. This is especially relevant for taxi drivers, sales representatives, or people whose work requires extensive travel.
Third, current interest rates on leasing and loans are still high. If you have the opportunity to buy a car without borrowing, you will avoid interest charges that can add up to several thousand euros over 5--7 years.
Buying a Car: Arguments Against
Illustration: Buying a Car: Arguments Against
However, there are also serious arguments against this decision.
What you will lose:
Pension funds earned an average return of 6.1% in 2025, and for participants under 50 -- around 7%. This means EUR 10,000 grows by approximately EUR 600--700 per year. Over 20 years, including compound interest, this amount could double or even triple.
Additionally, the state contributes EUR 402 annually (2026 figures) -- this is "free money" that you will lose by opting out. Over 20 years, this amounts to more than EUR 8,000 in incentive contributions alone.
A car is a depreciating asset:
Unlike a pension fund, a car loses value from day one. On average, a new car depreciates 15--25% in the first year, and 40--60% over five years. So a car that cost EUR 15,000 may be worth only EUR 7,000--9,000 after 5 years.
When Is the Decision Justified?
Withdrawing pension funds for a car can be a smart choice in these cases:
1. Emergency condition: Your current car is simply unsafe. Failing brakes, steering problems, body corrosion -- all of this poses a real danger. In such cases, investing in a safe car is a matter of health and life.
2. Critical work necessity: You cannot work or earn a living without a car. If not having a car means losing your job or significantly reduced income, the investment is justified.
3. You are approaching retirement age: If retirement is 5--10 years away and the accumulated amount is not large, the pension fund's growth potential is limited. In such cases, the practical benefit now may outweigh the uncertain benefit in the future.
4. You have other savings: If the pension fund is just one of your saving vehicles and you have other investments or savings, a partial withdrawal will not harm your financial security in old age.
Practical Calculation: An Example
Imagine a 40-year-old person who:
- Has EUR 12,000 in the pension fund
- Their personal contributions amount to EUR 7,500
- Wants to buy a used car for ~EUR 7,000
Scenario A -- Withdraws all funds:
- Receives ~EUR 7,500 (after state portion deductions)
- Buys a car
- Does not accumulate for the next 25 years (until retirement)
- Sodra pension increases slightly due to returned accounting units
Scenario B -- Withdraws 25%:
- Withdraws ~EUR 1,875 (25% of their contributions)
- After the 3% deduction, receives ~EUR 1,819
- Adds another EUR 5,181 from personal savings and buys a car
- The remaining ~EUR 10,000 continues to grow in the pension fund
Scenario C -- Withdraws nothing:
- Takes out a lease or loan for the car
- Pays interest (5--8% per year)
- The pension fund continues to grow
Each scenario has its own logic, and the right choice depends on the individual situation.
How to Make the Decision?
We recommend taking the following steps:
1. Assess your financial situation: Do you have other savings? Do you have urgent debts? What are your monthly income and expenses?
2. Calculate the exact amounts: Log into Sodra and your pension fund accounts, find out the exact figures.
3. Compare alternatives: Perhaps a lease or loan with low interest is a better alternative? Can you save for another year and buy a car without touching your pension?
4. Think about the actual need for a car: Do you really need a new car right now? Perhaps your current one can serve for another year or two?
5. Consult someone: Although the final decision is yours, a conversation with a financial advisor or even family members can help you see the situation from a different perspective.
Summary
Withdrawing second pension pillar funds to buy a car is neither a good nor a bad decision -- it depends on your situation. If a car is essential for safety or work and there are no other options -- it can be a justified step. But if you simply want a newer car for "prestige" or comfort -- it is worth thinking twice.
Remember: retirement will come unexpectedly fast, and a car will already be history in 10 years. Invest wisely.
Planning to buy a car? WheelStreet.lt helps find reliable used cars with a full history check. No need to pay upfront -- we can help arrange financing with favourable terms. Contact us for a free consultation.
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