Do the bogleheads think this 22 year old belgian is smart or naïve?

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frugalbelgian
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Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by frugalbelgian » Mon Feb 03, 2020 12:08 pm

Hello Bogleheads!

I am a 22 year old belgian who is planning to start his journey to FIRE
I would mean the world to me if you can help me evaulate my lifeplan :)

some details on me:
70+% savings rate (and happy with this frugal lifestyle)
planning to reach the retirement age within 10-15 working years, i will preferrably start to spend more time with my (future) kids and wife.
i would not stop working, i would find an part time job when reaching the FIRE age to increase living standard (nicer rent house, kids, etc)
my emergency fund is 6 months of living expenses
I don't see myself needing a large amount of money since i am not planning on buying a house, car, etc.

My portfolio i would use:
SPDR® MSCI ACWI IMI UCITS ETF (EUR) | IMIE
iShares Global Aggregate Bond UCITS ETF USD (Dist) (EUR) | EUNU
source --> https://www.debelgischebelegger.be/home ... tefeuille/

I would like to aks you if you think this plan is realistic? I also have a few follow up questions:
How would I "level" out the investments each year with this portfolio?
Is it smart to not invest in any pension/savings plans that offer tax benefits? --> https://www.debelgischebelegger.be/home ... oensparen/
What kind of ratio should i choose between my investings knowing i am young and dont need any money?
Feel free to give advice on anything i have not mentioned here.

Thanks for reading this post! Really hoping someone will guide me in this. :)

bloom2708
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by bloom2708 » Mon Feb 03, 2020 7:53 pm

I would be 85/15 at your age. Some would say 100/0, but with a high savings rate, you don't have to be 100% stocks.

Fantastic savings rate. Adjust in increments as you get closer to your goals.

Don't plan too far out and don't forget to have some fund along the way.

Seems I vote "smart".
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

Longdog
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by Longdog » Mon Feb 03, 2020 8:05 pm

I would say smart enough to develop a plan and ask for some advice, but also naive to think you know what your life and expenses will be like in 10-15 years. But also smart (and humble) enough to know that maybe you're being naive.

You're off to a great start, making some really great choices right now. Whether or not you FIRE in your 30s or not doesn't really matter too much. Maybe you will; maybe you won't. Either way it will be a good outcome for you - you'll have a great portfolio for someone your age, and it will provide you security and options throughout your life.

Best of luck to you!
Steve

xxd091
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Location: UK

Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by xxd091 » Tue Feb 04, 2020 5:04 am

Once you have set your Asset Allocation ie Equities/Bonds ratio- do not change it-resist the urge to tinker!
Concentrate on your day job where you have some control-make your money and then invest it
Live frugally
That’s it!
I would however keep reading and learning-John Bogle books,Lars Kroijer has a good website and videos etc
xxd091
PS A Global Equity Index Tracker Fund and a Global Bond Index Tracker Fund are all you need or equivalent in ETFs

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JoeRetire
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by JoeRetire » Tue Feb 04, 2020 6:47 am

frugalbelgian wrote:
Mon Feb 03, 2020 12:08 pm
I am a 22 year old belgian who is planning to start his journey to FIRE
I would mean the world to me if you can help me evaulate my lifeplan :)

planning to reach the retirement age within 10-15 working years, i will preferrably start to spend more time with my (future) kids and wife.
i would not stop working, i would find an part time job when reaching the FIRE age to increase living standard (nicer rent house, kids, etc)
my emergency fund is 6 months of living expenses
22 years old and already decided to work full time for only 10-15 years so that you can spend more time with a wife and kids you don't have...

I applaud you for saving a lot. But I think you are rather young to try to nail down this many specifics of your life.

Good luck.
Very Stable Genius

NGKEIB
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by NGKEIB » Tue Feb 04, 2020 7:56 am

frugalbelgian wrote:
Mon Feb 03, 2020 12:08 pm

Is it smart to not invest in any pension/savings plans that offer tax benefits? --> https://www.debelgischebelegger.be/home ... oensparen/
My understanding is that the insurance lobby in Belgium has been pretty strong, and so for pension schemes (whether employer scheme, pension-savings scheme, life insurance scheme, complementary scheme for independents), you can either pick between "guaranteed rate + potential bonus" or investing in actively managed funds (higher costs and presumably a bigger kickback to the insurance companies, which is why they pushed this).

Based on these, these investments aren't that good. The difference is that you can get a tax saving, which needs to be factored in - e.g. look at what it costs your employer to give you money net vs putting it into a pension fund on your behalf. You'll have a better investment with your net salary, but you'll start with much less too.

In any event, to get the lowest tax rates you need to keep the money in these pension funds until the legal retirement age (who knows how long that will be), whereas you're likely to need/want the money much sooner.

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frugalbelgian
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by frugalbelgian » Tue Feb 04, 2020 9:23 am

First of all, thanks for all the fast answers!

This gives me confidence to choose this portfolio to start off my investing life.
To the people talking about me setting future values too much, you are absolutely right! (I am a bit of a control freak)
Learning to let go of predicting is something i will have to manage, especially if i plan to be an index investor.

I already love this forum, i am planning to read a lot of Jack Bogle's books.

one last question: Wich brokerage do you guys use as an belgian for index investing and why?
(If this already is described in a post i would be more than happy with a link, don't want to come off lazy)

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Forester
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by Forester » Wed Feb 05, 2020 8:38 am

frugalbelgian wrote:
Mon Feb 03, 2020 12:08 pm
Hello Bogleheads!

I am a 22 year old belgian who is planning to start his journey to FIRE
I would mean the world to me if you can help me evaulate my lifeplan :)

some details on me:
70+% savings rate (and happy with this frugal lifestyle)
planning to reach the retirement age within 10-15 working years, i will preferrably start to spend more time with my (future) kids and wife.
i would not stop working, i would find an part time job when reaching the FIRE age to increase living standard (nicer rent house, kids, etc)
my emergency fund is 6 months of living expenses
I don't see myself needing a large amount of money since i am not planning on buying a house, car, etc.

My portfolio i would use:
SPDR® MSCI ACWI IMI UCITS ETF (EUR) | IMIE
iShares Global Aggregate Bond UCITS ETF USD (Dist) (EUR) | EUNU
source --> https://www.debelgischebelegger.be/home ... tefeuille/

I would like to aks you if you think this plan is realistic? I also have a few follow up questions:
How would I "level" out the investments each year with this portfolio?
Is it smart to not invest in any pension/savings plans that offer tax benefits? --> https://www.debelgischebelegger.be/home ... oensparen/
What kind of ratio should i choose between my investings knowing i am young and dont need any money?
Feel free to give advice on anything i have not mentioned here.

Thanks for reading this post! Really hoping someone will guide me in this. :)
That is a great plan to transition to part time work. Another option would be MSCI global min vol, 100% that in your thirties, then add in some bonds after 30. The chief benefit being lower drawdowns when markets are selling off.

international001
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by international001 » Wed Feb 05, 2020 12:06 pm

IMIE has a high TER of 0,40%. Don't you have something better available?

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BeBH65
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by BeBH65 » Wed Feb 05, 2020 1:09 pm

You seem to have started well. You have alreade received some good answers.

Have a look at Bogleheads_investing_start-up_kit_for_non-US_investors and Investing_from_Belgium
Consider updating your opening post adding the info according to this template. The info requested should trigger you to think about a num ver of topics ( How big is your emergency fund? )


How much can you afford to loose? Stocks can loose 50% in a short period, and not recover even after many years. How will you react?
- If you have a 50/50 equity/bonds portfolio, you would have lost 25%.
- if you have a 80/20 equity/bonds portfolio, you would have lost 40%.
Choose

The equity fund that you selected has an high yearly cost; there are better options - check the wiki pages above.
How much do you intend, and with which frequency? --> this will determine the best broker depending on transactioncosts.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Schlabba
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by Schlabba » Wed Feb 05, 2020 3:06 pm

frugalbelgian wrote:
Mon Feb 03, 2020 12:08 pm
Hello Bogleheads!

I am a 22 year old belgian who is planning to start his journey to FIRE
I would mean the world to me if you can help me evaulate my lifeplan :)

some details on me:
70+% savings rate (and happy with this frugal lifestyle)
planning to reach the retirement age within 10-15 working years, i will preferrably start to spend more time with my (future) kids and wife.
i would not stop working, i would find an part time job when reaching the FIRE age to increase living standard (nicer rent house, kids, etc)
my emergency fund is 6 months of living expenses
I don't see myself needing a large amount of money since i am not planning on buying a house, car, etc.

My portfolio i would use:
SPDR® MSCI ACWI IMI UCITS ETF (EUR) | IMIE
iShares Global Aggregate Bond UCITS ETF USD (Dist) (EUR) | EUNU
source --> https://www.debelgischebelegger.be/home ... tefeuille/

I would like to aks you if you think this plan is realistic? I also have a few follow up questions:
How would I "level" out the investments each year with this portfolio?
Is it smart to not invest in any pension/savings plans that offer tax benefits? --> https://www.debelgischebelegger.be/home ... oensparen/
What kind of ratio should i choose between my investings knowing i am young and dont need any money?
Feel free to give advice on anything i have not mentioned here.

Thanks for reading this post! Really hoping someone will guide me in this. :)
You're off to a good start. Live below your means, invest the difference. I would say go 100% shares and find yourself a cheaper ETF (TER of 0.25% or less), you can find recommendations on the wiki.

The naïve part of your plan is that you think you can predict anything more than a few years out. I am not much older than you but I was never able to predict how I would end up 5 years ago.

occambogle
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by occambogle » Tue Feb 11, 2020 6:08 am

I am by no means expert, nor that knowledgeable about Belgium. But I am in the process of about to invest for my Belgian wife so have been looking over similar situations. She is NOT currently a Belgium resident so is not subject to Belgium taxation, but I want something that will stay suitable if she moves back there. She is also paid in USD and most expenses in other world currencies, so she is different from your situation.

My main quetsion is.... Don't dividends get taxed at 30% in Belgium? If so is it not better to buy Irish-domiciled ETFs that are accumulating, rather than distributing?

For my wife I am currently looking at a mix of:

Global equities:
VWRA - Vanguard FTSE All-World UCITS ETF USD Accumulation
https://americas.vanguard.com/instituti ... ode=EQUITY

Global bonds:
AGGU - iShares Core Global Aggregate Bond UCITS ETF USD Hedged (Acc)
https://markets.ft.com/data/etfs/tearsh ... GU:LSE:USD

But that is USD-orientated. If you are investing in Euros, then perhaps:

Global equities:
VWCE - Vanguard FTSE All-World UCITS ETF EUR ACC
https://www.bloomberg.com/quote/VWCE:GR

Global bonds - EUR-hedged
AGGH/EUNA - iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc)
https://www.ishares.com/uk/individual/e ... s-etf-fund

But... don't listen to me I may be wrong, hopefully someone more knowledgeable can comment......

NGKEIB
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by NGKEIB » Tue Feb 11, 2020 7:12 am

occambogle wrote:
Tue Feb 11, 2020 6:08 am
My main quetsion is.... Don't dividends get taxed at 30% in Belgium? If so is it not better to buy Irish-domiciled ETFs that are accumulating, rather than distributing?
Yes, dividends are taxed at 30% (though a small amount - around 640 €/year - are exempt from tax). Generally, capital gains aren't taxed, provided that you can demonstrate it corresponds to the normal management of your private estate. An important exception to this, however, is funds that are covered by the Reynders tax (at least 10% in bonds).
https://news.pwc.be/belgian-tax-on-savi ... tice-note/

OogieBoogie
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by OogieBoogie » Tue Feb 11, 2020 7:22 am

It is great that somebody with age 22 is creating such a plan. Wished I had made similar thoughts at that age, and not 30 years later.. There is no indication about how much your saving rate in $ is, but with your age I do assume that your potential to earn more is realistic.

JL Collins provides real life situations, you will face during your journey.
https://jlcollinsnh.com/stock-series/?s ... cription-2

Don't forget to invest in yourselves, the more skills you have the better chance that you can increase your salary (and usually also an increase of job complexity or responsibilities).

With an age of 22 you are phase where you accumulate your wealth. There might be maybe reasons to buy bonds, but if it is because of risks reasons, I would stay partly in cash and jump in, if there would be a crash). Otherwise stay with a max money in ETF's equities (probably Vanguard) which covering most of the world with low TER. Most popular are

- Vanguard VT is the global stocks universe ETF
- Vanguard VTI is the US stock universe ETF

Don't forget - most of the bigger US companies are global. So investing in e.g. S&P 500 already is covering a huge chunk of international business.

As you are in Belgium (and not in the US), the banking costs might are usually a point you need to watch out. Usually an online bank or other low-cost provider will save you a lot of money during many years. Many of the FIRE active members are using Interactive Brokers (IBKR). They are cheap and transparent. Especially when you buy e.g. US stocks in $, but you pay with €, usually a bank makes 1% of the Forex transaction. At that will be every month when you invest in your assets.

Keep the way how you invest as simple as possible. We are playing the long turtle game here..
Anyway good luck to your journey!

occambogle
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by occambogle » Tue Feb 11, 2020 7:33 am

NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Yes, dividends are taxed at 30% (though a small amount - around 640 €/year - are exempt from tax)
So it would make sense to use an accumulating ETF vs a distributing one, right? I can't see any disadvantage to using an accumulating ETF... is there?
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Generally, capital gains aren't taxed, provided that you can demonstrate it corresponds to the normal management of your private estate. An important exception to this, however, is funds that are covered by the Reynders tax (at least 10% in bonds).
https://news.pwc.be/belgian-tax-on-savi ... tice-note/
Thanks for that information, though I read it and still confused. It seems awfully complicated and unclear. Any advice on how to choose ETFs with regard to this?

Valuethinker
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by Valuethinker » Tue Feb 11, 2020 8:40 am

occambogle wrote:
Tue Feb 11, 2020 7:33 am
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Yes, dividends are taxed at 30% (though a small amount - around 640 €/year - are exempt from tax)
So it would make sense to use an accumulating ETF vs a distributing one, right? I can't see any disadvantage to using an accumulating ETF... is there?
Tax. In the UK you would only hold an accumulating fund in a non-taxable account (SIPP, ISA).

occambogle
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by occambogle » Tue Feb 11, 2020 9:13 am

Valuethinker wrote:
Tue Feb 11, 2020 8:40 am
Tax. In the UK you would only hold an accumulating fund in a non-taxable account (SIPP, ISA).
I assume by "In the UK" you are talking about a UK resident.
That wouldn't affect the OP, a Belgian, holding accumulating Irish domiciled ETFs listed in London.... would it?

Valuethinker
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by Valuethinker » Tue Feb 11, 2020 10:07 am

occambogle wrote:
Tue Feb 11, 2020 9:13 am
Valuethinker wrote:
Tue Feb 11, 2020 8:40 am
Tax. In the UK you would only hold an accumulating fund in a non-taxable account (SIPP, ISA).
I assume by "In the UK" you are talking about a UK resident.
That wouldn't affect the OP, a Belgian, holding accumulating Irish domiciled ETFs listed in London.... would it?
Yes.

On the second point, I don't know the Belgian tax system - I can only point out that in other tax systems, there is a clear preference.

BrownEyedGirl_27
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by BrownEyedGirl_27 » Tue Feb 11, 2020 10:47 am

frugalbelgian wrote:
Mon Feb 03, 2020 12:08 pm
Hello Bogleheads!

I am a 22 year old belgian who is planning to start his journey to FIRE
I would mean the world to me if you can help me evaulate my lifeplan :)

some details on me:
70+% savings rate (and happy with this frugal lifestyle)
planning to reach the retirement age within 10-15 working years, i will preferrably start to spend more time with my (future) kids and wife.
i would not stop working, i would find an part time job when reaching the FIRE age to increase living standard (nicer rent house, kids, etc)
my emergency fund is 6 months of living expenses
I don't see myself needing a large amount of money since i am not planning on buying a house, car, etc.

My portfolio i would use:
SPDR® MSCI ACWI IMI UCITS ETF (EUR) | IMIE
iShares Global Aggregate Bond UCITS ETF USD (Dist) (EUR) | EUNU
source --> https://www.debelgischebelegger.be/home ... tefeuille/

I would like to aks you if you think this plan is realistic? I also have a few follow up questions:
How would I "level" out the investments each year with this portfolio?
Is it smart to not invest in any pension/savings plans that offer tax benefits? --> https://www.debelgischebelegger.be/home ... oensparen/
What kind of ratio should i choose between my investings knowing i am young and dont need any money?
Feel free to give advice on anything i have not mentioned here.

Thanks for reading this post! Really hoping someone will guide me in this. :)
I think your savings rate is fantastic and the fact that you are starting so early puts you far ahead of your peers. Congrats, too, on having a healthy emergency fund. You’ve followed the Boglehead steps. I don’t know how much you have in the market already and don’t know anything about investing as a Belgian resident.

Your best investment will be to find a spouse who has the ability to save money and has a healthy relationship with money. You need someone who can be transparent with you on what her expenses and income (if any) are. It’s not easy to find a mate who will have the same goal of retiring early, or any of the other characteristics I listed above. In the US most of my peers are spending on travel and experiences, and slowly getting into investments. One of the things I love about my husband (we are 26 and 27) is that he shares a vision with me of having financial freedom in retirement and minimizing debt. He is always conscious on what he spends and he helps me plan out our finances—if you can find someone who is happy to be truly equal with you financially you will be doing better than most young people.

Best of luck OP with your plans and I hope you find a great woman to share your life with! :happy
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig

NGKEIB
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by NGKEIB » Thu Feb 13, 2020 6:10 am

occambogle wrote:
Tue Feb 11, 2020 7:33 am
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Yes, dividends are taxed at 30% (though a small amount - around 640 €/year - are exempt from tax)
So it would make sense to use an accumulating ETF vs a distributing one, right? I can't see any disadvantage to using an accumulating ETF... is there?
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Generally, capital gains aren't taxed, provided that you can demonstrate it corresponds to the normal management of your private estate. An important exception to this, however, is funds that are covered by the Reynders tax (at least 10% in bonds).
https://news.pwc.be/belgian-tax-on-savi ... tice-note/
Thanks for that information, though I read it and still confused. It seems awfully complicated and unclear. Any advice on how to choose ETFs with regard to this?
Complicated and unclear = Belgian taxes

Three things to watch out for in Belgium:
1. Stock transaction tax - transaction tax due on purchase of stocks by Belgian residents, no matter where the brokerage account is situated. A Belgian resident who has a brokerage account in the US still needs to declare and pay this. Belgium (and some Dutch and Swiss) brokers do this for you. Rates go up to circa 1,3%.
2. Wealth tax - if your securities account(s) have a cumulative value of over 500k €, you will need to pay a wealth tax. This has been struck down by the courts, but not retroactively.
3. Income taxes - dividends are fairly simple (taxed at 30%), but the Reynders tax is much more complicated. I'm afraid I can't really give you that much advice, unless you want to avoid bonds altogether. You might make your life easier by having some ETFs that are all stock and some that are all bonds, meaning that you won't need to do much digging. I'm not sure if even Belgian brokers would do the withholding for you (or even help you by giving you reporting covering this).

Can't give you any advice on this front - due to my personal situation I don't invest in any ETFs (PRIIPS & PFIC issues).

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BeBH65
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Re: Do the bogleheads think this 22 year old belgian is smart or naïve?

Post by BeBH65 » Thu Feb 13, 2020 11:13 am

occambogle wrote:
Tue Feb 11, 2020 7:33 am
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Yes, dividends are taxed at 30% (though a small amount - around 640 €/year - are exempt from tax)
So it would make sense to use an accumulating ETF vs a distributing one, right? I can't see any disadvantage to using an accumulating ETF... is there?
NGKEIB wrote:
Tue Feb 11, 2020 7:12 am
Generally, capital gains aren't taxed, provided that you can demonstrate it corresponds to the normal management of your private estate. An important exception to this, however, is funds that are covered by the Reynders tax (at least 10% in bonds).
https://news.pwc.be/belgian-tax-on-savi ... tice-note/
Thanks for that information, though I read it and still confused. It seems awfully complicated and unclear. Any advice on how to choose ETFs with regard to this?
Belgium:
Exemption of dividend taxation is only for dividends directly paid by stocks, dividends paid by funds are taxed.
Alternativley, if your personal taxation rate is less then 30% you could recuperate the extra portion of the dividend witholding tax; ... most people in Belgium pay more then 30% taxes.

Equity funds --> Accumulating : you pay no dividend tax and you pay no capital gains tax and you do not have any costs to reinvest the dividends.

Bond funds:
- If you choose a fund that reinvest the dividends then you pay no taxes on the dividends but you pay 30% on the capital gains when you sell the fund.
- Alternatevely if the fund distributes ALL of its received interest then you pay dividend tax of 30% and no capital gains tax.
Unfortunately it seems that "many/most?" bond ETFs for some reason are considered not to distribute all of the dividends, and hence you will have to pay 30% on the capital gains as well. A bond fund will typically have capital gains in an environment of dropping intrest rates.
--> So the difference between distributing and accumulating will likely not be that big --> Choose a fund that best implements your chosen strategy.


Belgian brokers would do all the taxation for you.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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