Early Retirement in Amsterdam: the 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 Amsterdam, you can seek legal advice at Rechtbank Amsterdam (Parnassusweg 220) or Juridisch Loket Amsterdam (Vijzelstraat 77). Read all tax effects and calculation examples here.
What are the main tax implications of early retirement in Amsterdam?
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, which further reduces your final pension
These tax implications lead on average to an income decline of 20-35%. For personal advice in Amsterdam: Rechtbank Amsterdam, Parnassusweg 220 or Juridisch Loket Amsterdam, Vijzelstraat 77.
How does the tax burden work with early retirement?
The tax burden increases significantly upon retirement. You lose the general tax credit (€3,362 in 2024) and employment allowance (max. €5,052).
Tax Rates 2024
- Up to €75,624: 36.97% (bracket 1)
- Above €75,624: 49.50% (bracket 2)
A modal income of €40,000: employee pays effectively 15-20% tax, retiree 25-30%. Difference: €4,000-€6,000 net less per year.
What is revision interest on stamping off?
Revision interest is a one-time levy of up to 20% on the stamped-off amount. Example: €400,000 capital, 3 years early retirement, €100,000 stamped off = €20,000 revision interest.
Consult your pension fund and seek legal advice at Juridisch Loket Amsterdam (Vijzelstraat 77).
The AOW gap: major income loss
The AOW gap arises between early retirement and AOW age (67 in 2024). You miss approximately €1,400 net per month. For 3 years: €50,000+ loss. Unique to Amsterdam: local pension advisors can help with calculations.
Calculate your pension reduction
Early retirement by 1 year = 5-8% lower benefit for life. For €2,000 gross pension: €100-160 less per month, annually €1,200-1,920.
Amsterdam Tip: Make an appointment at Rechtbank Amsterdam (Parnassusweg 220) for tax disputes or to check your rights.
Alternatives to early retirement
Consider part-time pension, high-low arrangement or bridge pension. Get advice from local experts in Amsterdam.