When you are 65 (going to 67), you retire. In addition to a lot of free time, retirement also means something for your financial situation. You will no longer receive a salary every month, but you will receive a pension. You have built up this pension during your working life. Only this pension is lower than the salary you were used to until now. On the other hand, you will also be treated differently for tax purposes. In short, what now?
Retirement: what now?
When you are 65 (going to 67), you retire. In addition to a lot of free time, retirement also means something for your financial situation. You will no longer receive a salary every month, but you will receive a pension. You have built up this pension during your working life. Only this pension is lower than the salary you were used to until now. On the other hand, you will also be treated differently for tax purposes. In short, what now?
AOW
In the Netherlands, the implementation of the AOW has been left to the SVB (http://www.svb.nl). The SVB stands for Social Insurance Bank. The SVB pays out your AOW every month. The amount depends on your personal situation. If you are single, you will receive a net amount of 1,003 in 2011. If you are married or have a partner and you are both over 65 years old, the net amount per person is 699 per month. On average, the AOW amounts to approximately 1,100 per month.
Pension
In addition to your AOW, you will often also be entitled to a pension that you have built up during your working life. As an employee, you build up a pension through your employer. As a self-employed person you will have to provide your own pension.
Self-funded pension
In addition to your AOW and your pension through your work, you can also build up additional pension yourself. This can be done, for example, through an annuity or through a bank savings product. You must comply with strict tax rules if the premium paid is to be deductible from your income tax.
Build up pension
If you are building up a pension, the rule applies that your pension entitlement is not taxed. The premium paid is therefore deductible from your income in your income tax return. But when you retire, the benefit is taxed. Here you talk about the so-called reversal rule. It only leads to taxation when the benefit arrives.
Tax rates
Once you reach the age of 65, you no longer have to pay AOW premiums. You only pay this premium in the first two income tax brackets. This means that on balance you have to pay less tax on your income after retirement. In the year that you turn 65, you no longer pay AOW premiums from the month that you turn 65. If your birthday is in April, you will still pay AOW premiums until March. After that, you no longer pay the AOW premium.
To give you an idea, this means that in 2011 you will pay a total of 17.9% less income tax on the first 18,628. You also pay 17.9% less income tax on the second bracket of 14,856.
This saves you 5,994 in income tax in 2011. So you have to spend this extra amount.
Tax credits
Unfortunately, this means that you will receive fewer tax credits. The general tax credit is lower after your retirement. Your employment tax credit will also disappear, as you will no longer have to perform active work after your retirement for the purposes of income tax.
Multiple benefits
If you receive multiple benefits after your retirement, keep in mind that too much tax credit will be withheld by the various authorities. Therefore, let the authorities know clearly who should and who should not take the general tax credit into account.
Another point after your retirement is often that every agency starts with a salary from zero euros. So every authority is inclined to levy the first rates on your income. But if you add all the income together, the result will often be higher. In that case, too little income tax has been paid on the majority during the year. This will shock you in your first tax return. Therefore, check carefully whether the authorities withhold sufficient tax for you so that you will not end up with a large tax bill afterwards.
In short, a lot also changes fiscally when you retire. Therefore, think carefully whether you have insight into everything. It might be a good idea to talk to an advisor.