Tax optimization with retirement savings
One way of paying less tax is to make voluntary contributions into your pension fund. However, you’ll have to wait three years before you can withdraw the capital since otherwise the tax savings will be lost. It’s also important to know how well the pension fund is doing financially and how high the conversion rate is. If you and your spouse both work, make sure you make contributions to the fund that pays the higher benefits. Paying into pillar 3a is definitely worthwhile for both partners, in order to finance their own home and retirement.
Early withdrawal to finance your own home
Remember that if you withdraw capital from your pension fund, the pension or available pension capital will be lower as a result. For this reason, restrictions apply to withdrawals once you are over 50. Unless your pension fund provides otherwise, the advance withdrawal must be made no later than three years before you retire. Early withdrawals can only be made every five years.
How much capital you withdraw from private or retirement savings for the deposit on your own home will depend on your financial situation. From a tax perspective, it makes more sense to use your 3a capital in combination with pillar 2 in individual steps for repayment. In this way you reduce the rate of progressive taxation on capital withdrawals. Partial withdrawals of 3a capital to finance your own home are possible up to five years before you retire; from age 59 (women) and 60 (men) the full amount must be withdrawn.
Risk of (in)voluntary early retirement
The older we get, the harder it is to find a new job. If you’re unlucky enough to lose your job, you might prefer early retirement instead. The alternative is to try and get through the years until official retirement age on a much lower income. For mortgage holders, this means repaying the debt faster than planned to ensure it remains affordable.
Make sure you can afford it
Before making a purchase decision, you need to be sure you can still afford your home when you’re retired. After retirement, you as a couple will mostly have a much lower income. This means that the maximum possible mortgage needs to be lower in order for your home to remain affordable. This can also impact your decision on whether to withdraw “pension or capital.”
A mortgage is considered affordable if the fixed regular costs don’t exceed one third of disposable income. Fixed costs include interest, repayments and the ancillary costs of the property. A smaller loan or a lower purchase price of the property significantly increases your room for maneuver.