How to cancel Wohn-Riester for a home or how to proceed?

so step 2 (building savings sum reduced so that it is allocation-ready) would be done before step 1

step 1 would be:
- how does the financing look, is the option
A) without Wohnriester, so much more expensive than
2) with Wohnriester?

you can also simply calculate what will be taxable:
you are now X years old, Y years remain until 67, so capitalize Y years, with the 23,000€
then we have the amount

what taxes will be incurred?
very good question, there are again 2 options:
1) at age 67, tax the Wohnriester account with a 30% deduction
2) tax the Wohnriester from 67 to 85

how taxes will be in 10-20-30 years, that is rather a good question, the fact is that the entire pension will be "taxable"!

and if you assume that in 20-30-40 years there will be far fewer working people in Germany, but a lot more retirees, you can imagine who will fill the state coffers.

the government has already prepared for this... with:
- we will receive much less state pension = so we should provide privately
- in the past the pension was completely tax-free, this will gradually be adjusted (the allowance from 100% goes down to 0% over the years) meaning future retirees will be 100% taxable

today some retirees can still be happy if they have 2000€ pension and pay no taxes for it; in the future you will have to pay a lot from it


a brief note
if you earn 3000€ gross today, you have about 2000€ net in tax class 1 without church tax, etc.
if the pension should then be 1500€, but fully taxable, net remains 1250€ (taxes and health insurance!)

and now something else:
assuming the pension is 2000€
you then pay 200€ in taxes, tax burden: 10%
payout: 1600€ (200€ taxes, 200€ health insurance)
but if you have to pay another 200€ monthly in back taxes, it looks like this:
2000€ pension, but 250€ taxes (i.e. the additional 200€ cost 50€ more in tax, so we are already at 25%)
payout then 1550€

and I believe 2000€ pension (if you take the statutory one + the increase in 30 years, possibly also private retirement provision, etc.) is already calculated very conservatively... assume you will have to tax Wohnriester not at 25% but much more!



BUT now back to the topic:
simply calculate
what conditions are there if you leave the Wohnriester untouched
what conditions are there if you redeem it

and how large is the interest savings (we can calculate this very well)
and will it be greater than the tax back payment in retirement age? (we cannot calculate this... only make assumptions)

One thing I completely forgot.

The Wohnriester is PURPOSE-BOUND, meaning you have to become the owner of a property with the money, which you also use YOURSELF.

This of course remains the case as long as you have repaid it (i.e. the taxes...)

That means if you buy or build a house now, you should keep it.
The alternative would then be: sell the house and buy something else that you also use yourself (house, apartment...)

So you shouldn't sell the house and then want to live in a rental!
(Of course it is possible... but what and when you have to pay then, nobody can probably answer today!)

That is also a point where I say: you should think carefully if you include Wohnriester in the financing!

Many smoke screens. Facts. I have a huge contract with pb Insurance since 2005. Built 16-17. Loan interest rate 1.25%. The idea is that everything is cheaper than borrowed money, so don’t borrow more than necessary. In January 17, applied at the DRV Bund in Berlin for a payout of 18 thousand of our Riester with the use for the acquisition of owner-occupied residential property. Self! Important. It was approved as Riester-compliant. PB Insurance received the letter for information and paid out. The contract expires on 1.7.2023, as I will then be 65. The remaining and thereafter again accumulated balance will provide a small additional pension. Which belongs to the taxable equity. The payout amount was tax-free, it will also be taxable on 1.7.23, with 2% p.a. on top since 2017. I know that and will settle it tax-wise in one go with a 30% discount. My tax rate is about 15%. All in all, it was better to save the 18 credit and use the own money, which was highly subsidized. However, the DRV Bund required proof that we personally occupy the said property. Registration certificate was sufficient there. My advice, telephone call with the Riester advice of the DRV Bund, they explained everything very well to me and then also gave me good advice, although they are not allowed to, but if you say, please tell me what you would do privately if such and such, then you also get answers.

What makes it more difficult is that we would use this money for a house, but at the same time we still live in the owner-occupied condominium. We don’t yet know whether we will sell or rent out the apartment after completion.
The advisor said that the Riester payout for residential space can only be used "tax-free" if one finances ONE owner-occupied property with it.
Is that correct?

I don’t quite understand the part about the condominium. Was it originally financed through WR? And now there are still 23k left?
As far as I know, having one property does not mean you can’t change the property. The new property also has to be owner-occupied property.

For simplicity, the interest on the housing promotion account is excluded (this basically represents inflation).

Maybe consider this point: If inflation is now often over 2%, but only 2% is calculated in the Riester construct, then it would definitely be positive and worthwhile to pay taxes much later, right?

and now something else: assuming the pension is 2000€ you then pay 200€ in taxes, tax burden: 10% payout: 1600€ (200€ taxes, 200€ health insurance) but if you still have to pay 200€ monthly in back taxes, then it looks like this: 2000€ pension, but 250€ taxes (i.e. the additional 200€ cost 50€ more in tax, so now we are at 25%) payout then 1550€ and I think 2000€ pension (if you take the statutory one, + the increase in 30 years, possibly private retirement provision etc.) has already been calculated very conservatively... just assume that the Wohnriester does not have to be taxed at 25% but much more!

Phew... you write a lot of correct things. And then you make yourself dizzy again. Sometimes you include inflation, then you ignore it again. You get pretty confused. If pensions are higher in 30 years due to inflation, you cannot apply today's marginal tax rates. They adjust too. Otherwise, today everyone with minimum wage would pay the top tax rate because that was a lot of money back in the 50s ;)

Regarding your explanation with the building savings contract, I can’t say much. I am not knowledgeable enough about it. I can only say that Wohnriester first has nothing to do with a Bauspar-Riester.

I cashed out my basic fund-based Riester contract. At the moment it is paused and whether I will pay more into it until retirement, I don’t know yet. And if I pay more in, I will get a pension later that I of course have to tax. (But again: the subsidies taken along will with extremely high probability exceed the future tax payments.)

Now you must not relate the tax burden to the total amount. You have to look at the tax burden of the housing promotion account separately.

Maybe pick up this point: If inflation is now often above 2%, but only 2% is calculated in the Riester construct, then it would certainly be positive and worthwhile to tax much later, right?

Definitely. Although of course there are also years below 2%. 2% is just the target of central banks.

What is worthwhile with (housing) Riester is rather that today you take a lot of subsidies which you later pay less tax on overall.