Health insurance with retiring early

[norcal_sf]

My husband is a huge proponent of FIRE. I’m trying to figure out how this would even work with regards to health insurance. We’ve been paying into public health insurance for over 10 years in Germany. If we were to quit our salaried jobs and live off of investment income what does this look like? Paying the employee and employer portion up to a max of 900€ / month depending on our income?

[PandaMunich]

If we were to quit our salaried jobs and live off of investment income what does this look like?
Paying the employee and employer portion up to a max of 900€ / month depending on our income?

Yes.
You can calculate your monthly contribution here, just enter your average income: https://www.tk.de/service/app/2004108/b ... echner.app

And the maximum health insurance contribution is nearly 1,000€ per month by now.

[alma.freya]

Here are some resources I found useful for the topic of FIRE in Germany:

Der Privatier
Frugalisten

You can translate these using a browser plugin.

These links specifically for this topic:

der-privatier
frugalisten

When you are in the withdrawal phase i.e. you no longer work and are living off your investments, only your capital gains count as income. e.g. You could withdrawal 40.000 € from your investment account on Jan 1 to pay for the year's expenses, however that entire 40.000 € is unlikely to all be capital gains; a portion will include your own investment capital, which you don't pay taxes on.

So let's say from that 40.000 €, 10.000 € is your original invested capital and 30.000 € is capital gains. Your income for that year will be 30.000 €, and that is what you pay tax on.

According to the calculator posted by PandaMunich, your monthly health insurance contribution will be 480 €. However your health insurance contributions can be deducted from your taxes as vorsorgeaufwendungen:

After the deduction, your taxable income for this year is now 24.240 €.

Capital gains tax in Germany is 26.375%. You would have a tax bill of:

24.240 € * 26.375% = 6393 €.

However you can ask the Finanzamt to perform a Günstigerprüfung, which allows you to pay basic income tax instead of capital gains tax. Unless you have very high income, this usually results in a lower tax rate.

According to the basic tax income table, your income tax for the year will be:

24.240 € * 12% = 2854 €.

So in the following year, you probably want to withdraw an extra 3.000 € to cover the tax owed in the previous year.

When selling your shares, the oldest shares are always sold first. This is called First In, First Out or FiFo. Because these shares have been invested for longer, they will have a higher capital gain, resulting in more taxes to pay when you sell them. However there is a trick you can use to have more control over which shares are sold:

Steuerhack 3: Das LiFo-Prinzip

So it's possible to reduce your income even further, therefore paying less health insurance contribution and less income tax.

I hope nothing I wrote here is incorrect or misleading.

[norcal_sf]

Thank you all for the information!

[TheAlchemist]

That's the first I've heard or seen of capital gains being considered as income for the calculation of health insurance premiums.

If you're talking about investment income from a pure portfolio / Depot etc. then it shouldn't be considered as taxable income as CGT will have been paid.

The Krankenkasse will consider your taxable income "zu versteuerndes Einkommen" in their calculation of which drawdowns from taxable accounts such as mutual funds, ETF's does not count.

Paul

[murphaph]

That's the first I've heard or seen of capital gains being considered as income for the calculation of health insurance premiums.

Für freiwillige Versicherte gesetzlicher Krankenkassen sind Kapitalerträge beitragspflichtige Einnahmen. Grund dafür ist, dass bei freiwilligen Versicherten im Gegensatz zu Pflichtversicherten sämtliche Einkunftsarten für die Beitragsbemessung einfließen. Zu den beitragspflichtigen Einkommen von freiwillig Versicherten zählen neben den Kapitalerträgen:

Einnahmen aus selbstständiger Tätigkeit
Rentenbetrag laut Rentenbescheid
Versorgungsbezüge
Pensionen
Witwenrenten
Beamtenbezüge
Mieteinnahmen
Erträge aus Verpachtungen
Unterhaltszahlungen (von getrennt lebenden oder geschiedenen Ehepartnern)
Einkommen nicht gesetzlich versicherter Partner

If you're voluntarily insured then a bunch of stuff is considered fair game by the KK that isn't as long as you are compulsorily insured, either through employment or being in the Krankenversicherung der Rentner.

https://www.krankenkasseninfo.de/ratgeb ... raege.html

[PandaMunich]

That's the first I've heard or seen of capital gains being considered as income for the calculation of health insurance premiums.

You do know that that is "Einkünfte aus Kapitalvermögen" (= capital income)?

Well, then it's high time that you have a look at all types of income that German public health insurance charges contributions on from voluntary members (since that is what the norcal_sf and her husband will be once they quit their jobs): https://www.gkv-spitzenverband.de/media ... refrei.pdf

I would like to draw your attention to this entry on page 16:

2024-04-16 22_14_32-Katalog von Einnahmen und deren beitragsrechliche Bewertung nach § 240 SGV V vom.jpg (198.09 KiB) Viewed 1147 times

The above link is taken from the section "Grundsätze für die Beitragsbemessung freiwilliger Mitglieder" (= principles for the assessment of contributions for voluntary members), see here: https://www.gkv-spitzenverband.de/krank ... essung.jsp

The Krankenkasse will consider your taxable income "zu versteuerndes Einkommen" in their calculation of which drawdowns from taxable accounts such as mutual funds, ETF's does not count.

Their Krankenkasse (= public health insurer) will ask for their income tax Bescheid, will see their capital income in the section "Berechnung der Einkünfte, die nach § 32d Abs. 1 EStG besteuert werden (Abgeltungsteuer)" directly after the section "zu versteuerndes Einkommen" and will also use that to calculate their contributions.

[LeonG]

If you're voluntarily insured then a bunch of stuff is considered fair game by the KK that isn't as long as you are compulsorily insured, either through employment or being in the Krankenversicherung der Rentner.

https://www.krankenkasseninfo.de/ratgeb ... raege.html

You can be insured as a pensioner if you have been insured in Germany, compulsorily or family, for 90% of the 2nd half of your working life. The pension fund will pay the employers portion. They will also pay the same if you are on voluntary insurance if you apply for it

https://www.deutsche-rentenversicherung ... ntner.html

[murphaph]

You can be insured as a pensioner if you have been insured in Germany, compulsorily or family, for 90% of the 2nd half of your working life. The pension fund will pay the employers portion. They will also pay the same if you are on voluntary insurance if you apply for it

Yep but the OP is not yet in the KVdR (taking early retirement) so they will have to pay for voluntary membership until they can join the KVdR and the premiums are based on all the things in Panda's list. Once the OP reaches retirement age and is admitted to the KVdR, they can revert to only paying premiums based on their earned (pension) income and no longer pay premiums based on that long list of things.

It could be worth considering shifting assets to the older spouse (assuming both are entitled to join the KVdR at the same age) so that the older spouse then has "cheap" health insurance, not subject to earnings from their investments etc. and if enough assets are shifted, the younger spouse could be insured as a Familienmitglied (ie for free) on the older spouse's policy. The younger spouse would need to have less than ca. €450 monthly income to be insured on the older spouse's policy.

[LeonG]

Once the OP reaches retirement age and is admitted to the KVdR, they can revert to only paying premiums based on their earned (pension) income and no longer pay premiums based on that long list of things.

If they qualify.