Living in Denmark: tips, challenges and questions

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Eureka
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Living in Denmark: tips, challenges and questions

Post by Eureka » Thu Oct 20, 2016 3:46 pm

Again and again I see fellow Danes helping each other out in various threads all over the forum, but this great knowledge is hard to find and easy to overlook. Thus, with more and more Danes around, I thought it might be convenient to have a common ongoing thread where we share our frustrations, victories and questions when sorting out tax, investments, insurances, banks, pension laws, and all other money stuff localized to Denmark.

At least I myself would appreciate if some of you would share money savers tax tricks or other relevant knowledge you might have or discover.

Here is my first contribution:

I might be rather slow as @BadHorse already knew, but I just discovered that Bank Norwegian gives you a free savings account where you can withdraw your money any time without penalty and an annual interest rate of 0.85% - and they offer you a free credit card including a free travel insurance for travels up to 3 months as long as you buy your ticket (or your gasoline) with your Bank Norwegian credit card.

So now I will cancel my travel insurance. This will save me 656 kr/year for nothing :D

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chol03ac
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Re: Living in Denmark: tips, challenges and questions

Post by chol03ac » Sun Oct 23, 2016 1:46 pm

Thanks for info!

knap82
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Re: Living in Denmark: tips, challenges and questions

Post by knap82 » Mon Oct 24, 2016 6:37 am

@Eureka

Great idea with this thread.

Regarding the savings account - do you have to your other financials in the bank as well? Or can I open just the savings account?

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BadHorse
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Re: Living in Denmark: tips, challenges and questions

Post by BadHorse » Tue Oct 25, 2016 3:53 am

That travel insurance looks interesting.. will have to check it out. So far I've just got the account.
Do you know if it's just a 'delays & lost luggage' insurance, of if it also covers stuff like accidents, illness, and helicopter rescue from unexpectedly erupting volcanoes? I would guess the former only, otherwise it sure is a bargain!

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Wed Oct 26, 2016 5:39 pm

@knap82, no you do not need to have any other accounts by banknorwegian. In fact they have a very limited number of products.

@BadHorse, it is a complete free travel insurance with unlimited coverage for hospitals and treatments and your heirs even get 200.000 kr if you die.

Also no fees for withdrawal of cash etc so absolutely a thing to consider in this forum. At least I already got mine.

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chol03ac
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Re: Living in Denmark: tips, challenges and questions

Post by chol03ac » Sun Oct 30, 2016 3:35 pm

I would like to point out degiro.dk has ETFs that are free to buy. I am not impressed with the platform, but free brokerage in many different ETF is ok.
https://www.degiro.dk/data/pdf/dk/Kurta ... 0%99er.pdf

Nice with a Danish area!! :D

kalfatring
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Re: Living in Denmark: tips, challenges and questions

Post by kalfatring » Mon Oct 31, 2016 1:47 am

Concerning Bank Norwegian travel insurance: Are you covered unlimited or only 30/60 days which is common?

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Mon Oct 31, 2016 4:12 am

Bank Norwegian travel insurance covers trips up to 90 days. If the trip is >90 days they cover nada from day 1. Still pretty good for a free insurance, I would say.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Mon Oct 31, 2016 4:18 am

@chol03ac, do you have an account at degiro.dk?

I only read briefly about the platform and that you have to file all tax info yourself and thus thought, as a beginner, I should stick to Nordnet?

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chol03ac
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Re: Living in Denmark: tips, challenges and questions

Post by chol03ac » Mon Oct 31, 2016 8:32 am

Yes i have an account on degiro, you get an annual tax return sheet from Degiro and then you need to put the numbers on your tax return at SKAT (section 66) if you have win or loses, if you get amount as a yield from a stock it´s in ( 62, 63, 65 og 68).

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Re: Living in Denmark: tips, challenges and questions

Post by jacob » Mon Oct 31, 2016 9:49 am

Have any of you guys looked at real estate in various other parts of the country (not close to CPH or Aarhus) in terms of price, cost of living, ... My searches show that houses can still be bought for <750kDKK in places like Bornholm. Seems the full ownership is the way to go given high taxes on capital income. Also, has anyone looked at summerhouses as a viable source of income?

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FBeyer
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Re: Living in Denmark: tips, challenges and questions

Post by FBeyer » Mon Oct 31, 2016 11:09 am

Real estate investing away from major cities is the primary topic for next weekend's meetup. It's also currently my go to investment target given my background in construction, so yes. I'm working on it...

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FBeyer
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Re: Living in Denmark: tips, challenges and questions

Post by FBeyer » Wed Nov 02, 2016 5:48 am

REMA1000 is doing their best to avoid food waste.
They always have a part of their refrigerated section where you can buy stuff that is about to get old for 1/3 the usual price. They'll also stock stuff that got knocked around during transit and is now ugly, but perfectly functional; again being sold for about 1/3 the full price.
The company Defco has a 'new' concept where all the cutaway meat from their deli meats production is packed in special packages and sold at reduced prices. Rema and Føtex carry that as well.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Fri Dec 09, 2016 7:26 pm

chol03ac wrote:Yes i have an account on degiro.
I finally took a look at their webpage and indeed like the no fee option for buying and selling ETFs. However, I looked only briefly but didn't find any info about pension accounts. Do they have them or do you trade your ETFs in an ordinary fully taxed account?

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chol03ac
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Re: Living in Denmark: tips, challenges and questions

Post by chol03ac » Fri Jan 06, 2017 6:58 am

No i don't Think that you Can get a pension Account. I use a fully taxed Account. My Etfs are dividende Etfs that are High paying.

wood
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Re: Living in Denmark: tips, challenges and questions

Post by wood » Fri Jan 06, 2017 9:54 am

Eureka wrote:I might be rather slow as @BadHorse already knew, but I just discovered that Bank Norwegian gives you a free savings account where you can withdraw your money any time without penalty and an annual interest rate of 0.85% - and they offer you a free credit card including a free travel insurance for travels up to 3 months as long as you buy your ticket (or your gasoline) with your Bank Norwegian credit card.
Norwegian Air is their airline company who owns 20% of Bank Norwegian. Using Bank Norwegian credit card on almost all of your purchases will give you a 1% cashback in your airline user account with them, to be used on airplane tickets. I made one free trip last year. Its a low-cost, medium quality, airline company currently expanding bigtime. If you're a stockpicker, I recommend taking a look at their stock, both Bank Norwegian and Norwegian Air.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Fri Jan 06, 2017 5:00 pm

chol03ac wrote: My Etfs are dividende Etfs that are High paying.
Interesting. I still have so much to learn, but I guess it could make sense for me too then. Would you mind naming a few of the etfs you use?

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Sun Mar 05, 2017 12:10 pm

Hello fellow Danes.

I was wondering about your thoughts on "ratepension" (retirement savings) versus free assets.

Paying "topskat" I think it is difficult to fully comprehend the trade-off between maxing out for the 15%-savings (and the additional retirement tax on capital gains) and the value of being able to access the money before retirement age.

I am 30 years old and my official retirement age will be above 68 (more like 72). I belive it is possible to use your retirement savings 5 years prior without penalty tax (of a whooping 60%). So I can not use or spend any of these capital gains before age 63 at least. Thats around 20 years later than I want to retire.

1) Would you max out retirement savings for the taxsavings?
2) Would you keep as much as possible in "free assets" to have a more flexible and accessible private financial situation?

Best regards,
Rangle

thedollar
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Re: Living in Denmark: tips, challenges and questions

Post by thedollar » Sun Mar 05, 2017 3:49 pm

Interesting question. Let's say the following is true:

Time until retirement: 40 years
Marginal tax rate at present: 50% (because of topskat)
Marginal tax rate in 40 years: 28% (without topskat and arbejdsmarkedsbidrag)
Dividends and capital gains (when realized) tax is: 27%
PAL-tax: 15.3%
Penalty for withdrawing ratepension early: 60%
Interest rate: 5%

You now invest 200.000 kr in ratepension but only 100.000 kr in frie midler - since the tax rate is 50% - and compare the two.

To compare let's look at what it would cost to withdraw everything after 10, 20, 30 years plus when you are retired. Withdrawing "frie midler" requires paying capital gains tax except for the start amount. Withdrawing "Ratepension" before year 40 requires a penalty of 60%.

Year 10
Frie midler: 137.048 kr.
Ratepension: 121.123 kr.

Year 20
Frie midler: 192.899 kr.
Ratepension: 183.384 kr.

Year 30
Frie midler: 277.094 kr.
Ratepension: 277.650 kr.

Year 40 (retired)
Frie midler: 404.020 kr.
Ratepension: 756.668 kr.

So the penalty is not that big, really. The advantage is, however, very big for ratepension when retired. You get almost twice as much as when are invested in frie midler.

If you would like to see my calculations I can link the spreadsheet.

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Sun Mar 05, 2017 4:15 pm

@thedollar - thank you for making such a detailed answer. I am in the very beginning of my building phase and desperate to start off right.

I started my FI moving closer to work (buying an appartment in Copenhagen) and in doing so emptied my savings and are now rebuilding with around 20k DKK after tax a month. Going through your numbers I see the penalty is not too big also considering the lower cost I could get on index ETF compared to mutual funds in free assets (thus making up for some of the penalty I guess)

Still, I am afraid that future regulation will diminish the advantages (reducing tax on capital gains). I know it is not more than 50k before tax we are talking about, but in 15 years that would have made a substantial contribution to my portifolio.

thedollar
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Re: Living in Denmark: tips, challenges and questions

Post by thedollar » Sun Mar 05, 2017 4:24 pm

@Rangle

I do not care for using the ratepension myself because of the reasons you mention.

Good:
- More money
- There could come a "cheap" early withdrawal option
- ETFs make sense

Bad:
- Have to wait until age 67-74
- Penalty for withdrawing early
- Might not be as beneficial if the capital gain tax goes down

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Sun Mar 05, 2017 4:39 pm

@thedollar

It seems we landed on the same page.

Even though on an emotional level I am considering to just do a symbolic 1.5k contribution a month. That would be less than 5% allocation of my savings a month. All those uncertainties.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Thu Mar 09, 2017 5:46 am

Nice discussion. I look at all my savings as one huge portfolio no matter where it is invested. Thus, I have both ratepension and aldersopsparing - as they, like mentioned above, have lower tax and are suited for investing in low cost etfs. @thedollar's nice calculation clearly shows the advantage even with similar interest rate; to this add the advantage of buying low cost etfs etc.

Why would it be important to you to have access to ALL your money all the time?

I don't see the relevance of withdrawing with penalty.

I plan to turn 100 so I see plenty of opportunities to spend my ratepension savings at a later date when no penalty applies.

When living off my investments before I get access to these retirement accounts, I'll just withdraw my annual 3-4% spendings of my total net worth from somewhere else in my portfolio. And as long as my total portfolio grows, I don't see a problem with spending some of my 'frie midler' principal along the way.

Rangle
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Re: Living in Denmark: tips, challenges and questions

Post by Rangle » Thu Mar 09, 2017 8:31 am

Eureka wrote:Nice discussion. I look at all my savings as one huge portfolio no matter where it is invested. Thus, I have both ratepension and aldersopsparing - as they, like mentioned above, have lower tax and are suited for investing in low cost etfs. @thedollar's nice calculation clearly shows the advantage even with similar interest rate; to this add the advantage of buying low cost etfs etc.

Why would it be important to you to have access to ALL your money all the time?

I don't see the relevance of withdrawing with penalty.

I plan to turn 100 so I see plenty of opportunities to spend my ratepension savings at a later date when no penalty applies.

When living off my investments before I get access to these retirement accounts, I'll just withdraw my annual 3-4% spendings of my total net worth from somewhere else in my portfolio. And as long as my total portfolio grows, I don't see a problem with spending some of my 'frie midler' principal along the way.
Hello Eureka

I see your point. Must admit that I have no actual scenario in mind where withdrawal would be necessary. Though, I like the thought of being flexible and by definition binding your savings would not help me in that direction. But this is for scenarios I cannot predict. Like changes in taxation. Or the possibility to aqquire a business by selling ( :shock: ) stocks if the opportunity arrises.

It just seems that with a collective (overenskomstbestemt) pension at 17%, and max ratepension at 53k and max alderspension at 30k would bind too much of my savings. But then again, maybe that is the best idea. Alderspension not so much if (edit: taxation of) capital gains are reduced.

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Eureka
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Re: Living in Denmark: tips, challenges and questions

Post by Eureka » Thu Mar 09, 2017 9:51 am

thedollar wrote: Bad:
- Have to wait until age 67-74
If you make your ratepension account now, you can start withdrawing from it when you turn 62 - also if the general retirement age (folkepensionsalder) increases at a later time. So if you don't have any ratepension account yet, I suggest you make one - even if you only deposit peanuts in it. Same goes for aldersopsparing. Better just make one.

I have a ratepension that I can withdraw from when I turn 60 as the rules were like that when I made the account.

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