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Early Retirement Tax Implications Tilburg

<p class="excerpt"><strong>Early retirement in Tilburg</strong> sounds attractive, but has significant <strong>tax implications</strong>. Higher tax burden due to loss of employment allowance, revision interest, AOW gap, and permanent pension reduction. On average, a 20-35% income drop. Local assistance via <strong>District Court Zeeland-West-Brabant, Wilhelminapark 100</strong> and <strong>Tilburg Legal Advice Centre, Spoorlaan 364</strong>.</p>

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Early Retirement in Tilburg: Tax Implications at a Glance

Early retirement sounds attractive, but has significant tax implications. By stopping work earlier, you face a higher tax burden due to the absence of employment allowance, revision interest on stamped-off pension, an AOW gap, and permanent pension reduction. On average, early retirement results in an income drop of 20-35%. In Tilburg, you can seek legal advice at the District Court Zeeland-West-Brabant, Wilhelminapark 100 or the Tilburg Legal Advice Centre, Spoorlaan 364. Read here all tax effects, calculation examples, and what you need to know.

What are the main tax implications of early retirement in Tilburg?

If you take early retirement, your tax situation changes drastically. The main tax implications are:

  • Higher tax burden: You lose the employment allowance (€5,052 in 2024) and pay more tax on your pension income
  • Revision interest: When stamping off accrued pension, you pay a one-time revision interest of up to 20% to the Tax Authorities
  • AOW gap: Between your early retirement date and the AOW age (67 in 2024), you miss AOW income of approximately €1,400 net per month
  • Permanent pension reduction: Your monthly pension decreases by 5-8% per year you retire early, for life
  • Fewer accrual years: You no longer accrue new pension, further reducing your final pension

These tax implications lead on average to a 20-35% income decline compared to working until AOW age. For personal advice in Tilburg: District Court Zeeland-West-Brabant, Wilhelminapark 100.

How does the tax burden work with early retirement?

The tax burden increases significantly when you retire. During your working years, you benefit from the general tax credit (€3,362 in 2024) and the employment allowance (maximum €5,052 in 2024). This employment allowance fully lapses once you have no employment income.

Tax rates and tax credits 2024

In 2024, the following tax rates apply:

  • Up to €75,624: 36.97% (bracket 1)
  • Above €75,624: 49.50% (bracket 2)

An employee with a modal income of €40,000 pays effectively about 15-20% tax thanks to the tax credits. A retiree with the same income pays effectively 25-30% tax, because the employment allowance is absent. This difference of 10-15 percentage points means approximately €4,000-€6,000 less net income per year on €40,000.

What is revision interest and when do you have to pay it?

Revision interest is a one-time levy you pay if you stamp off your accrued pension to retire earlier. Many pension schemes offer the option to stamp off pension. Because you had tax benefits during accrual, you must pay revision interest upon stamping off.

Revision interest calculation

The revision interest amounts to a maximum of 20% of the stamped-off amount. The exact amount depends on:

  • The number of years you retire early
  • The size of your pension capital
  • The actuarial calculations of your pension fund

Example: Suppose you have accrued pension capital of €400,000 and want to retire 3 years early. You stamp off €100,000 to finance this. The revision interest then amounts to €20,000 (20% of €100,000), which is withheld immediately or can be paid in installments to the Tax Authorities.

Note: revision interest is due upon stamping off. Always consult your pension fund about the exact tax implications. In Tilburg, you can also consult the Tilburg Legal Advice Centre, Spoorlaan 364.

The AOW gap: a significant income loss

The AOW gap is the period between your early retirement date and the moment you receive AOW (67 in 2024, rising to 67 years and 3 months in 2025). For 3 years early retirement, you miss approximately €50,000 net AOW benefit.

AOW gap example: For 3 years early retirement, you receive no AOW for €1,400 net x 36 months = €50,400. You must fully finance this gap from your own pension or savings.

Working until AOW age completely avoids this gap. For complex calculations: make an appointment at the District Court Zeeland-West-Brabant, Wilhelminapark 100, Tilburg.

Permanent pension reduction: lifelong effect

Each year you take early retirement, your monthly benefit decreases by 5-8% for life. For 3 years early retirement, you lose 15-24% of your monthly pension for the rest of your life.

Calculation example: Pension €2,000 net per month. For 3 years early retirement: €1,600-€1,700 net per month. Annually €4,800 less, over 20 years €96,000-€115,200 less income.

Where can I find legal assistance in Tilburg?

For personal advice on early retirement and tax implications:

  • District Court Zeeland-West-Brabant
    Wilhelminapark 100, 5041 EA Tilburg
    Tel: 088-3620100
  • Tilburg Legal Advice Centre
    Spoorlaan 364, 5038 CC Tilburg
    Tel: 0900-8020 (national number)

Both institutions offer free or affordable assistance in assessing your specific situation.

Should I take early retirement? Checklist

Consider these factors before deciding: