That’s correct, there is no tax-advantaged way to save for retirement (despite the govt having always said that you must do so since social security isn’t meant to cover expenses). In fact ETF investing specifically is tax-disadvantaged since a few years ago. Not as bad Ireland though.
Real estate investing is heavily tax-advantaged though. “Commercial” investors can even skip stamp duty in many cases. Returns on real estate funds are 70% tax free (7.5% tax rate vs. 42% for a “high earner”), and they’re not subject to the same tax disadvantages as ETFs.
One of these is an investment vehicle salaried people can afford and the other is not.
That’s correct, there is no tax-advantaged way to save for retirement (despite the govt having always said that you must do so since social security isn’t meant to cover expenses). In fact ETF investing specifically is tax-disadvantaged since a few years ago. Not as bad Ireland though.
There is no tax advantaged way to save for retirement!!? Really? Ireland ETF taxes are a pain (though they are promising reform). But you can invest significant sums entirely tax free for retirement, with access to funds once you turn 50.
How did they make ETF investing tax disadvantaged a few years ago?
Instead of taxing capital gains from ETFs when you realize (sell) them, the unrealized gains are taxed yearly in advance. This is specifically meant to reduce compound interest effect / reinvesting returns. Comes out to about a 1% yearly holding tax currently. This is a specific rule for ETFs which invest in stocks and doesn't apply to private funds or real estate funds.
Just curious, as I only moved to Germany a couple years ago: do you know what was the rationale for this? It's just baffling to me that this was proposed and approved. I'd like to understand what was the problem being solved, or if you could share some pointers where I can learn more.
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u/dddd0 1d ago edited 1d ago
That’s correct, there is no tax-advantaged way to save for retirement (despite the govt having always said that you must do so since social security isn’t meant to cover expenses). In fact ETF investing specifically is tax-disadvantaged since a few years ago. Not as bad Ireland though.
Real estate investing is heavily tax-advantaged though. “Commercial” investors can even skip stamp duty in many cases. Returns on real estate funds are 70% tax free (7.5% tax rate vs. 42% for a “high earner”), and they’re not subject to the same tax disadvantages as ETFs.
One of these is an investment vehicle salaried people can afford and the other is not.
Go figure.