Well the word on the streets is that Dieter doesn't live alone. He's actually had the same partner for a while now, but they have to keep their relationship on the dl because, and I hope you're ready for this, his partner is the Loch Ness Monster.
If the government ever found out that Dieter was harboring something like that, he'd be in huge trouble and his best friend and lover would be taken away from him.
They actually have to dress the Loch Ness Monster up in different costumes (kind of like Roger from American Dad) so that no one gets suspicious.
And Dieter being dumb is just an act. If something ever did go wrong and the Loch Ness Monster was discovered, Dieter could easily play it off like he was fooled into thinking the Loch Ness Monster was the characters it dresses up like.
It all makes perfect sense.