Hey everyone, short time lurker here (introduction will follow). Had this answer typed out already, botched it
and now I´ll just type out an abbreviated version, just ask if you want more details. I´m aspiring to become a tax consultant in a few years (~3) so I know a little bit about this topic.
Read along fellow Germans, run away bored everyone else:
All numbers are € if they are no percentage of sth. SHI = Social/Statutory Health Insurance, PHI = Private Health Insurance (in Germany there´s a distinction made between "Gesetzliche Kranken
kassen" (Social (and mostly mandatory) Health Insurance and "Private Kranken
versicherung" (Private Health Insurance), companies running as a business).
In Germany´s social security system there are lot´s of thresholds, limits etc. e.g. I´ll refer to "Jahresarbeitsentgeltgrenze" (JAEG aka "Versicherungspflichtgrenze" -> limit for mandatory insurance in social security and
"Beitragsbemessungsgrenze/BBMG" (social security contribution assessment ceiling), also raised every year -> if you have to pay
x% of your income for Social Security, then after the ceiling of
y you only pay
x%*y even if you earn more than
y.
If you pay for SHI you also pay for social nursing care insurance, if you have PHI you still pay it, but the premium is different. You pay ~8.5/1.5% of your salary, your employer 7.3/1.275 for SHI/Nursing
Also this is mostly an approach for Singles and DINKs, considering kids make this more complex than necessary.
1. Public health and care insurance and social security in general
You are right in general. From an ERE perspective, there are 4 approaches to HI.
a) Do the normal thing and don´t stop working as an employee. Find something you enjoy doing and do it for example as a 450€-Job aka Minijob (marginal" part time job). You pay almost nothing for Social Security and stay insured in SHI and also in Social Retirement Insurance and the income ist tax free. You also can use tax free salary components for boosting this advantage.
This is a viable option in ERE, because you don´t leave the system entirely and remain flexible in the future. Of course you have to find some work you like doing.
b) Voluntary member of SHI: If you earn more than 60k (-> JAEG, raised every year) you can decide to stay in SHI. Monthly Premium: 700 (BBMG of 4425*15.6%) for SHI and 124 for nursing. Premium as an employee 372 and 68, employer pays the rest.
If you have no employer but your own business (or do nothing and live just from investments etc) you can make the same decision. Your monthly premium: ~18% of your total income (from business, investments, rent etc), but limited by BBMG. Also there can be quite some hassle from your insurance.
c) Familienmitversicherung (spousal co-insurance)
Marry. Have a spouse who is in either a) or b). Stop working yourself. Earn less than 435 a month. If you earn more, you have to insure yourself and either b) or d) applies.
d) PHI
If you are above JAEG or are not employed you can opt to insure yourself via PHI. The ERE approach would be to find stable company with stable and slow raises in premium. Get a flexible contract with a low deductible (tax reasons, also your employer pays half your premium up to 323/54 a month (-> BBMG in SHI/Nursing). This tariff should include "Krankentagegeldversicherung" (coverage for sick leave) and "Beitragsentlastung im Alter" (reduced principal at retirement age) and an option to change it to "Zusatzversicherung" (supplementary insurance).
When you quit your high paying job to do whatever, raise the deductible to (very) high (tax reasons; the lower your income, the higher your deductible). This will cost you somewhere around 400 to 800 a month if you pay it all yourself. If you´re unemployed, you might consider drropping the "Krankentagegeld", but that´s a complex decision. Why opt for PHI? Arguably better treating standards, would cost you extra if you are in SHI. Benefits for being sick less often, only visiting doctors in emergencies or for preventive examinations and for living healthily. Saving money with high deductibles. But this is a different decision for everyone, according to your circumstances of life.
Important: If you are no member of Social Retirement Insurance, some stuff like rehabilitation treatment ("Reha", "Kur") is not covered by SHI and not necessarily by PHI.
2. Taxes
Also quite right. The higher the difference in personal income of each spouse, the higher the tax benefits. The opposite also applies: if both earn the same, benefits are (close to) zero. But factoring in other aspects, married with prenup is preferable to unmarried LTR.
Grundfreibetrag is at 9000 in 2018, rising a little each year. Investments get another free 801. The rest is either taxed with 25% (+Soli +church tax) or with your personal tax rate, whichever results in less tax.
"Vorsorgeaufwendungen" are capped at 1900 (or 2800 if you don´t have an employer paying part of your insurance), BUT HI and Nursing can always be fully deducted (minus what you pay for "Krankentagegeld"). Also, by being in PHI, you have the possibillity to save around 500 to 1000 a year if you manage all your insurance payments efficiently.
Something worth considering is the "Spardosen-GmbH" (piggy bank Ltd) if you have more than ~150k in stocks, options and bonds. you can also employ yourself, so you would legally be an employee. Very good if you also want start your own business (but beware of insolvency; minimize risks with legal planning).
If you have a close and trusted friend and you both want to live in a house: A buys the house B wants to live in and vice versa. Now B pays rent to A and vice versa. Great way of saving taxes, espacially in employment phase, you can even deduct visits to each other. Needs loads of trust though.
3. Public pension system (and unemployment insurance)
Yeah, doesn´t really apply for ERE/FIRE. But having some years in the pension system might hedge you against political risks. The rest is mentioned under 1. Special cases, as always, if you are no member in SHI but in a semi-privatized alternative ("Versorgungswerke" e.g. for lawyers, tax advisers, doctors).
4. Put together & bonus
Depending on your income and insurance, taxes should be from 0 to 15% in full ERE mode. Problem: Withholding tax is mostly 15%, you can use them to lower to income tax you have to pay, but depending on the taxes you pay, not everything will be reimbursed. Also depending on whether your broker is located inside of Germany or not, your cash flow from investments is lowered and only 75-85%.
Challenges for ERE in Germany: Complex rules for every possible situation, but the system is tailored to the work ´til 67 crowd*. Investing has no real lobby** and so you run into additional challenges. So you often are the odd one out and minimizing trouble by working a couple of hours and having a business as side hustle is almost a must. This could very well result in one more year syndrome.
You can be FIRE with 300 to 400k, but if you don´t lower your expenses massively, you still gotta earn something on your side. OTOH you are in no need for 40h/week.
*Riester/Rürup/Entgeltumwandlung/Social Security is all aimed at this majority
*take Riester/Rürup/Entgeltumwandlung again: Inflexible, lost upon death, high fees, low return. Except from special cases you would be better off buying Shares of Allianz SE than buying their Riester-Insurance. But grant your employees some investments in the stock market? Nigh impossible
I know this is really long, but the previous version was full of Paragraphs/articles, 5th grade Math and more detailed
Also I don´t want to spam links, but the most relevant to this thread:
https://der-privatier.com/ for tales of bureaucratic hurdles of retiring early and
https://www.finanzwesir.com/autonome-zellen for possible meet-ups of all kind of people with an interest in finance. Also I´m located somewhere between Regensburg (worth a visit for tourists) and Ingolstadt, anybody close?
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. 