How can I best invest my severance pay to take advantage of tax benefits?
April 26, 2023 | 50,00 EUR | answered by Edith Hartmann
Dear tax consultant,
I am facing the decision of how best to invest my severance payment in order to take advantage of tax benefits. The background is that after many years of service, I will receive a severance payment and I am now considering the most sensible way to invest the money. I would like to avoid having to give a large portion of the severance payment to the tax office, so it is important for me to utilize tax optimization opportunities.
Currently, I am unsure whether it is more beneficial to invest the severance payment directly, spread it across multiple investment options, or even invest it in a tax-optimized investment. I also wonder if there are specific tax regulations or benefits that I should consider when investing my severance payment.
My concern is that without expert advice, I may not be able to take advantage of all tax opportunities and could end up paying unnecessary taxes. Therefore, it would be very helpful for me to receive specific investment options or strategies from you that can help me invest my severance payment in a tax-optimized way.
Could you please give me tips on how best to invest my severance payment in order to take advantage of tax benefits? I would greatly appreciate any specific investment options or tax regulations that I should consider when investing my severance payment.
Thank you in advance for your support.
Kind regards,
Fred Lehmann
Dear Mr. Lehmann,
Thank you for your inquiry regarding the tax-optimized investment of your severance payment. It is understandable that you are thinking about how to best invest your money to take advantage of tax benefits. I am happy to provide you with some tips and advice that may help you in making your decision.
First of all, it is important to know that severance payments are generally taxed as income. The progressive income tax rate applies, meaning that the higher the severance payment, the higher the tax rate. However, there are various ways to minimize the tax burden.
One option is to divide the severance payment into multiple investment forms. By diversifying your assets across different investments such as stocks, bonds, real estate, or even in the form of life insurance policies, you can optimize the tax burden. Different types of investments are subject to different tax rates. It may be beneficial to invest a portion of the severance payment in tax-optimized investments such as Riester or Rürup pensions, as tax benefits can be utilized here.
You should also consider tax regulations specifically for severance payments. For example, there is the so-called "Fünftelregelung," which can be applied to severance payments. In this case, the severance payment is spread over five years and only one-fifth of the amount is taxed annually. This can significantly reduce the tax burden.
Another option for tax-optimized investment of the severance payment is the use of tax-optimized investment funds or investing in tax-advantaged life or pension insurances. These investment forms also offer tax benefits that you can take advantage of.
However, it is important to note that the tax optimization of the severance payment depends on various factors, such as your individual tax situation, your planned investment duration, and your personal risk profile. Therefore, I strongly recommend seeking advice from a professional tax advisor who can analyze your personal situation and provide you with tailored investment options.
I hope these tips are helpful to you and support you in making your decision. If you have any further questions or would like individual advice, I am more than happy to assist you.
Best regards,
Edith Hartmann
Tax advisor
