Another Hello from Germany

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Another Hello from Germany

Post by Lenticularis » Mon Dec 18, 2017 5:40 pm


Let's get right to it: I'm from Germany and would love to get to know like-minded people, preferably in real life, face to face. If you're interested in meeting some time (and place), please feel free to reach out.

Here's a some background. I'm a guy in my late 30s. I stumbled across FIRE half a year ago and started gravitating towards ERE few months later.

I consider myself lucky to be able to start the journey to ERE from a privileged position:
  • My upbringing was rather frugal.
  • I chose a well paying career that I even enjoyed for most of the ride.
  • I have figured out somewhat early in life that only the inflation part of lifestyle inflation is actually fun (hedonistic adaptation and all that jazz). I hence deliberately allowed for lifestyle inflation, but (luckily) limited the pace.
  • The net effect is that I sustained a healthy savings rate ever since I started working full-time - even despite having no particular financial goal.
  • I built modest competence in investing to find some purpose for the money I saved.
From an ERE point of view, however, my spending used to be highly inefficient and my "ERE competence" is lacking in several areas.

During the last six months, I largely revamped my value system. The rest feels like technicalities by comparison, albeit important ones. Most of them happen to still be in progress, like aggressively cutting my expenses, understanding the maths of FIRE (and relevant German law), as well as building competence in previously neglected areas. I also do not yet have a strong vision of what I want, but have managed to identify some key elements: health, autonomy, being with friends and family, being close to nature, having time by myself.
Another tricky question is figuring out how much inefficient spending I want to be able to finance from passive income or how much headroom I want to keep for big life changes.

It would be great to find people to discuss big questions as well as technicalities (including German particularities). But mostly I hope to enjoy a conversation (about ERE) without being considered rather (very) weird. ;-)

Greetings from Germany!

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Re: Another Hello from Germany

Post by MDFIRE2024 » Tue Dec 19, 2017 12:48 am

Hi Lenticularis. Welcome to the ERE-forum! There are no weird discussions here. There is always an insight to the discussion. Great to have another German here, because there are not too many on this board sadly. Well, you are!

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Re: Another Hello from Germany

Post by frommi » Tue Dec 19, 2017 1:41 am

Welcome, where are you located in germany?

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Re: Another Hello from Germany

Post by fips » Tue Dec 19, 2017 2:42 am

Lenticularis, welcome!

Happy to discuss any German particularities, of which there are plenty ;-)
What's your profession?

If more people are interested, we can arrange a meetup sometime.

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Re: Another Hello from Germany

Post by finity » Tue Dec 19, 2017 4:29 am

German EREanism is growing strongly, welcome ;)
Maybe we need to open up a thread for all of our german specialities on how to best live the ere lifestyle and play the system (taxes, part time work, health insurance, days off, Kindergeld, Elternzeit etc). Maybe we will even add all of that content to the wiki :o 8-)

In terms of creating a german movement, I'm going to gift the ERE book on christmas to a few people :lol: Only very few, totally non-stupid people, of course. Most people have no idea of how little we spend/much we save compared to them [1] and - let's face it - they have no interest in ER, wouldn't grasp the concept at all and would think we are nuts, if we were to tell them. There are less than 5 people to whom I can talk about this.

[1] this shows our efficiency: If they don't notice us spending half of what they do, we are doing something right, don't we?

Poor Daniel
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Re: Another Hello from Germany

Post by Poor Daniel » Tue Jan 09, 2018 11:09 am

Hi Lenticularis, great to hear from more people in Germany, I've lived there for a while too.
greetings from Vienna!

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Re: Another Hello from Germany

Post by Lenticularis » Fri Jan 12, 2018 5:05 pm

Thanks for the welcome! :-)

That's why I'm here! I was refering to (weird) real life discussions with non-ERE minded people.

Location: somewhere in the middle of Germany.

Profession: technology something.

@fips & finity:
I like the idea of collecting country specific information in a suitable place. Maybe you would like to set up a place? (I feel I'm too new here to choose wisely.)
I'll start with some content shortly (here).

@Poor Daniel:
In the context of this forum, Vienna feels near by. :-)
By the way, I've been there a couple of times and really liked it. What's the cost of living there (maybe rent in particular)?

I really like your point of view: "This shows our efficiency: If they don't notice us spending half of what they do, we are doing something right, don't we?"
I do, however, believe that "they" tend to notice some aspects. Going car free, for instance, tends to stick out a lot, in particular in rural areas. Positive examples: (somewhat) minimalistic amount of stuff, frugally acquired, self-made food from economically sources ingredients, clothing in classic or generic style worn for many years, ...

Considering a meet-up:
Is anyone interested besides me and fips?
If so, where? Given that some of you seem to be located in the south of [Germany & Austria], maybe Munich or Passau could be suitable middle ground? Or somewhere in the Alps?

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Re: Another Hello from Germany

Post by Lenticularis » Fri Jan 12, 2018 5:19 pm

Here is my understanding of taxes, health insurance etc. Disclaimer: I'm not at all an expert on this matter. On the contrary, I'm asking for your insights to find flaws in my understanding.

1. Public health and care insurance.

Seems to be vastly different when being employed, self-employed, "officially unemployed" (Arbeitsamt / Hartz IV) or other. (Let's ignore private insurance, state employees and other special cases for now.)
  • Employed: fixed percentage of wage with upper limit. (Reduced percentage in case of wage ~450 to ~900 (??) per month. Not applicable below ~450 (?) per month. I.e. if one is willing to tolerate being employed at ~500 per month, health insurance can be below 50 a month.)
  • Self-employed: fixed percentage ~18% of ALL income (including capital income!) with a high minimum ~400 per month.
  • Officially umemployed: likely not relevant for ERE.
  • Other: similar to self-employed: ~18%, but the minimum is only 170 per month. (Can be zero in case of income below ~7k (?) per year with a publically insured spouse (Familienmitversicherung).)
Does this seem about right?

2. Taxes.

Let's focus on a single (everything seems to simple double for a married couple).
(Most) capital income (above 800 per year) seems to be taxed at a fixed percentage (Abgeltungssteuer). But in case regular tax rates are lower, those seem to apply (Antrag auf Günstigerprüfung). All income below ~10k (9k, +800 for capital income, +1k for wage income?) per year seems to be tax free (Grundfreibetrag). I hope (at least a major portion of) health insurance expenses may be deducted (Vorsorgeaufwendungen??), making ~12k (??) per year tax free (assuming 170 per month health insurance, see above). Above that, marginal tax rates seem to rise rather sharply with income.
Does this make sense or am I being to optimistic?

3. Public pension system (and unemployment insurance).

Currently this seems to be mandatory only for employees (and some special cases, of course). Let's hope it stays that way. (There seem to be on-going discussions to change this, which might mess quite a bit with FIRE / ERE finances.)

4. Put together.

As a simplified summary, in the ~9k to ~13k range (yearly total income), the sum of payment for income taxes, health insurance etc. should come out somewhere around 18% to 22% in typical cases (but can deviate by a lot, see above).

Let's assume a conservative safe withdrawl rate of 3.25% minus 0.15% fees. This means required investable net worth is 1/3.1%/(1-22%)=41 times yearly expenses (excluding health insurance) or a more memorable factor 500 times monthly expenses.

Want to have a self-employed side hustle? I guess one could still consider the factor 500 applicable by assigning the additional 230 Euro minimum monthly health insurance payment to that income. I suppose this makes sense in particular if that income is only assigned for optional fun expenses (travelling etc.).

I would greatly appreciate your opinion and corrections.

Bonus: tax advantaged retirement saving.

Riester, Rürup and deferred compensation (Entgeltumwandlung) all seem borderline pointless. Only very good offers (regarding fees and returns) seem to stand a chance to maybe offset the higher fees and lost flexibility (locked up money) by tax savings. The latter are tempting, the big picture doesn't seem to be, however.
Do you agree?
Last edited by Lenticularis on Sat Jan 13, 2018 8:40 am, edited 1 time in total.

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Re: Another Hello from Germany

Post by MDFIRE2024 » Sat Jan 13, 2018 7:27 am

1. Public health and care insurance: I think so too.
2. Taxes: yes, it seems correct. health insurance expenses can be deducted 100%.
3. Public pension system (and unemployment insurance): I think so too.
4. Put together: depends highly on future SWR(all factors need to be considerd, such as Asset Allocation, portfolio net returns, PE-valuation, retirement withdrawal strategy, income taxes on investments, risk aversion, inflation, currency risks (Währungsrisiko der ETFs/Aktien/Anleihen), portfolio depletion or preservation, sequence-of-returns-risk, first 10-15 years of "retirement", change in cost of living...)
...and the changes in upcoming laws and regulations, when you retire.

Thank you for this summary!

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Re: Another Hello from Germany

Post by Lenticularis » Sat Jan 13, 2018 8:38 am

2. Isn't deduction of health insurance expenses limited? Seems to be 1900 per year if employed and 2800 if self-employed (and other??) based on a quick internet search. Should be fine (or close enough) at 170 expense per month, but relevant at 400.

4. I agree, the SWR is a complex beast in detail. Thinking in terms of SWR after fees, but before taxes, public health insurance, etc., the country specific aspect is getting from that to net income. As the former is covered extensively in the FIRE community, I focussed on the latter.

Given all this uncertainty (generic and country specific), I'm considering to
  • only cover essential spending by passive income,
  • assume a conservative SWR (e.g. 3.1% after fees),
  • and plan to have additional income for at least a couple of years after leaving the 9-to-5.
Partial retirement if you will, which seems to be what everyone (who blogs about it - selection bias?) ends up doing anyway.

I envision the following benefits:
  • Able to retire from 9-to-5 earlier.
  • Get better understanding of where my expenses will settle in "retirement".
  • Increased flexibility to address sequence of returns risk - given that the first 10-15 years are crucial. Kind of a variable withdrawal rate strategy mitigated by other income.
Any additional income should be optional (with at least 90% probability). I.e. something along the lines of "Want an expensive hobby? Go make some money!" plus risk mitigation (sequence of returns risk, change in regulations, unexpected change in essential spending).

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