FIRE calculator Germany — Abgeltungsteuer & Freistellungsauftrag

What is Abgeltungsteuer?

Abgeltungsteuer (literally "withholding tax" or "final tax") is Germany's flat 25% capital gains tax on investment income — dividends, interest, and realized capital gains. Add the 5.5% Solidaritätszuschlag surcharge and the total effective rate is approximately 26.375%, plus church tax (8–9%) for those registered in a church, bringing the total to up to ~27.99%. Unlike the UK or Ireland, Germany taxes unrealized gains in certain fund structures (Vorabpauschale — the prepayment levy on accumulating ETFs), even before you sell.

The Freistellungsauftrag: your annual allowance

Every German taxpayer gets a Freistellungsauftrag (saver's exemption order) of €1,000 per year (€2,000 for married couples filing jointly). Investment income up to this threshold is not subject to Abgeltungsteuer. If you split your portfolio across multiple banks, you can distribute the allowance accordingly, but the total cannot exceed €1,000. In a FIRE portfolio of, say, €600,000 yielding 4%, the first €1,000 of your €24,000 annual withdrawal is tax-free; the rest is taxed at ~26.4%.

FIRE number calculation for Germany

The standard 4% rule assumes pre-tax withdrawals. In Germany, tax reduces the real purchasing power of each withdrawal. A rough adjustment: if your effective Abgeltungsteuer rate is ~26%, you need to gross up your spending target.

Example: you want €30,000/year after tax in retirement. To receive €30,000 net, you need to withdraw approximately €40,700 gross (€30,000 ÷ 0.736). At a 4% withdrawal rate, that implies a portfolio of €1,017,000 — versus €750,000 on a naive pre-tax basis. The Freistellungsauftrag saves around €264 in tax annually, a small but worthwhile offset.

How to use this calculator for Germany FIRE

• Enter your current balance — the total across all your ETF depot accounts (Depot).
• Set your monthly contribution — your net monthly savings rate going into the depot.
• Set your FIRE target using your grossed-up annual spending divided by 0.04. Remember to account for Abgeltungsteuer on withdrawals above the Freistellungsauftrag.
• Use a return rate of 6–7% nominal for a globally diversified equity ETF, net of your fund's TER (Total Expense Ratio). Popular choices in Germany include the iShares Core MSCI World and Xtrackers MSCI World Swap ETF.

Gesetzliche Rentenversicherung (state pension) and FIRE

German state pension (Gesetzliche Rentenversicherung) is contribution-based. Early retirees who stop contributing will have significantly lower Rentenpunkte (pension points) and therefore a reduced pension. For someone retiring at 40, the state pension may only cover €400–€800/month from age 67. Most German FIRE planners treat this as a bonus income layer rather than a core part of the plan, and size their portfolio to cover 100% of spending from investments alone.