BearBones wrote:
If you are planning to send kids to college, does the 1M affect financial aid? Seems that this should be considered. Options:
Kids don't go to college
Kids work and pay own way
Loans
To be fair, it seems that indicating that you could live off of 1M means that 1) you no longer work, 2) you are comfortable covering all parental expenses if you have kids and 3) you can cover all anticipated and unanticipated future medical costs in retirement. Higher education and health care are more secure in Germany, aren't they dkalder? Hence the ability to live on median of 19K.
I don't really know if those are more "secure" in the long run - given the current state of affairs. But for the moment they are in most cases cheaper. The lowest stage of public health insurance costs 150PPP$/month, which you are eligible for if you have no job, are not officially self- or unemployed (but e.g. early retired) and have less than 10000PPP$ realized capital gains in a year. Public health insurance does not care about prior conditions.
Private health insurance can go even lower when you are young and without prior conditions - and is totally independent from your income - but is very dangerous when getting older, because it may become very expensive quickly. And there are no real HDHP options.
Basically, when living off 1M$, it is probably best to be privately insured up to 45y of age, then be employed for exactly one year in *any* kind of job (requirement to be allowed back into the public system) and then switch back to the public health insurance. I am not quite sure if you could employ yourself in a self-owned LLC to achieve that. As the public and the private health insurance system both have totally different ways to determine premiums and the premiums may rise differently in the future - as well as the fact that it is not easy to switch between both systems - it is hard to judge which strategy would be best for a 1M$ early retiree. Especially when switching might become extremely difficult after any new laws in the future.
It's always fascinating how mature societies put up these twisted systems.
Higher education on the other hand is easier - it's free again as university tuition fees have mostly been abolished after lasting only a few years.
Apart from those two aspects it really is PPP$ - meaning you will buy as much food, transportation and housing with those 19K here as in the US. Please note that gas is nominally
much more expensive (because of very high gas taxes), thus many people use public transport or the bicycle, houses of a similar size cost much more (thus most people rent an apartment and the majority does not own a house) and VAT is also higher, which is paid from the net income. Those are all reasons for the PPP$ ratio as it is.
I think the biggest threat to a 1M$ early retiree in Germany is future tax increases and expropriations. The parties right up to what we consider "center" are talking about increasing the capital gains tax up to 30 or 33% from 26.75% right now and reintroducing a wealth tax, which taxes the principal up to a one-time payment of 10% (!). If you see, what happens right now in France (>60% stock capital gains tax, millionaires tax etc.), a millionaire retiree in Germany should be frightened, too.
The general mood in the population is becoming increasingly socialist again and if the crisis tightens, I would not want to be a millionaire here around. I would probably try to emigrate abroad. Apart from that, it's easy to live off 30K$ for the time being, as most people have to settle for less.
In general, I find it very interesting how different wage, tax and social security levels in different countries make certain more unconventional live models more or less difficult to pursue. E.g. I have crunched the numbers and it is
much more difficult for an employed engineer to retire early in Germany than it would be in the US with a similar job and qualification.
