As of: March 13, 2024, 8:33 a.m
By: Hendrik Buhrs, Jonas Fehling
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Saving with stock ETFs © IMAGO
You may want to use your stock ETF to fund your retirement.
Or is the payout phase already approaching?
Then you should know and avoid a big mistake: switching your retirement money from an accumulating (reinvesting) ETF to a distributing one.
This can cost you many thousands of euros.
Where does this idea even come from?
The idea behind this is often to live off ETF distributions in addition to your statutory pension in retirement.
And for that you need a dispenser.
And that works in principle: you sell your existing accumulating ETF holdings and then put it into a distributing one.
But there is another way and, above all, much cleverer: Because of course - ETF professionals can skip the sentence - you don't need a payer to easily get your money.
You can also simply sell individual shares from your accumulator on a regular basis and save yourself the hassle of reallocating them.
Why is reshuffling a mistake?
Above all, you should save it to save money!
Because think about what this redeployment means: You first sell your entire accumulation asset - and have to pay tax on the proceeds in one fell swoop.
This is 18.4625 percent if we take into account the partial exemption (30 percent of your ETF profits are spared from the 26.375 percent withholding tax including solos).
This deducted tax is then missing when you reinvest in the distribution, so two things happen: You only receive distributions on the amount that is left over.
And much worse: the tax money deducted can no longer increase.
Because even in retirement, a large part of your money remains invested.
So for a big chunk of it, you would be giving away the compound interest effect - which can make a big difference in the long run.
Example:
You have maintained a savings plan of 200 euros a month for over 40 years.
We also expect a cautious return of 6 percent pa. Then you will end up with a portfolio value of around 383,500 euros.
You have deposited 96,000 euros of this, the rest are winnings.
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Now you make the mistake of selling everything because you want to transfer it to a distributor.
This will immediately cost you around 53,000 euros in taxes.
You will then be left with around 330,500 euros, which you can invest in the distributor.
If we assume a distribution yield of 2 percent pa, you would receive around 6,600 euros in distributions in the first year - but you also have to pay taxes on them: you are left with around 5,400 euros.
If you had stayed with the accumulator instead?
And want to get the same amount of money paid out through sales?
Then you would have to sell shares worth around 6,600 euros - if your bank normally sells the oldest shares first (“first in, first out”).
So it's not the same 6,600 euros as the payout above, it just happens to be the same rounded number.
We calculated order costs of 10 euros per monthly payment or order.
If you only sell once a year or are with a cheap neobroker, these costs can be much lower.
In total, you pay around 1,200 euros in taxes and sales costs.
This is almost identical to the dispenser.
53,000 euros that continue to work for you
The key difference is the tax deferral effect: unlike when you shift your tax to the distribution, you don't have to pay 53,000 euros in taxes in one fell swoop.
You only pay taxes gradually when you sell.
So the 53,000 euros can continue to increase: If we again assume our 6 percent annual return, that brings in just under 3,200 euros in the first year or 2,600 euros after taxes.
That's around double your taxes + selling costs in the first year.
In other words, the tax deferral easily paid off all of your costs.
This also applies to other savings rates and terms that we have calculated.
Here some examples:
Finanztip sample calculation for ETF savings plans: Thousands of euros more due to tax deferral effect © Finanztip
In absolute terms, the effect is greater the more money you have in your portfolio.
With a savings rate of 400 euros, your return due to tax deferral in the first year is almost 3,000 euros greater than your taxes plus sales costs.
Important:
All of this is based on the assumption that current tax laws continue to apply.
We left out the advance flat rate and your 1,000 euro savings allowance per year (you could use this for both distributions and sales anyway) in our comparison to keep it simple.
Get even more out of it: with the Finanztip 3x10 strategy
We have not yet taken into account the Finanztip 3x10 strategy, which we developed for all savers in 2023.
It's about how you can manage to pay a large part of the tax as late as possible when selling ETFs and thus get more money out of it overall - in our calculation example, an impressive 28,000 euros at the time.
This allows you to further enhance the effect from our example above.
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This article is available to IPPEN.MEDIA as part of a cooperation with the non-profit money guide Finanztip - the original for this article "
Can cost thousands of euros: Beware of this ETF mistake
" comes from the weekly Finanztip newsletter from February 18, 2024.
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