Accumulating vs. distributing

When buying an ETF you have to decide: accumulating or distributing?

Accumulating (Acc):

• Dividends are reinvested automatically
• Maximum compound interest effect
• You don't have to do anything
• Tax advantage in Germany: the advance lump sum (Vorabpauschale) is often lower than the actual dividend
• Ideal for: building wealth (phase: working & saving)

Distributing (Dist):

• Dividends land in your account (quarterly or annually)
• Regular passive income
• The saver's allowance (€1,000) is used automatically
• You may have to reinvest dividends yourself
• Ideal for: retirement (phase: withdrawing money) or using the saver's allowance

The optimal strategy:

• Assets up to ~€50,000: distributing (to use the saver's allowance every year)
• Assets over ~€50,000: accumulating (the saver's allowance is used up, tax deferral becomes more valuable)
• In retirement: distributing (regular payouts without having to sell units)