I have a (not fully decided) plan to stop working around June 2026
49 years old, single, no children, no car, renting apartment in Zürich city
I have tried to make some annual estimates of my forthcoming financial situation:
Assets:
IB 4M in VT
Cash 50k
Pillar 2 400k (will move this out of company pension to finpension vested)
Pillar 3a 200k
Income:
Assuming VT gives 1.5% dividends, 60k
(I don’t include any of the pensions in my estimates as I am years away, but for completeness, I will have the 2 and 3a lump sums available later and maybe monthly Swiss AHV and UK state pension)
Mandatory Expenses:
Wealth tax (8k) + Income tax (2k) + (Multipliers + Bundessteuer) gives tax total 23k
AHV 11k
Health insurance/costs (I have an ongoing health problem) 10k
Accident Insurance 300
Serafe 335
(any other legally mandatory expenses?)
That is around CHF 45k
Plus:
Rent 20k
Normal living expenses like Food/Clothes/Transport/Holidays/Electricity/Internet/Mobile Phone etc. 10k
So rough estimate of 75k annual expenses which should be covered by dividends + selling CHF 20-30k stock.
Do I miss anything obvious?
I will stop paying into 3a because it seems paying into 3a only reduces tax via salary income not dividend income?
In case anyone is wondering, I plan to be 100% in equities via VT because with 4M and low withdrawal of 0.5-1% I think I can deal with market drops.
That one is bothering me a bit (personally), I’m a bit afraid of being stuck/not being able to move once FIRE’d due to lack of salaried income/unusual setup (most agencies wouldn’t bother understanding the situation even if it’s safe for them, which also means potentially paying a large premium).
(While it would “fix” the problem, personally I don’t want to own, too much hassle)
(edit: especially given what seems to be a fairly cheap rent for you, 1.6k/month seems hard to find those days, I can’t imagine trying that with the additional complexity of not having salaried income)
Just FYI, real estate funds have a fairly stable dividend yield at ~2% (even if the value of the share is pretty volatile, the absolute amount of dividend is likely to stay stable, so it can be a good long term investment). This is currently exempt from wealth/income tax (which is an extra ~1% yield compared to taxable given Zurich marginal tax rates)
FYI if I computed correctly, the tax rate will be below the amount recoverable by DA-1 (tax rate will be around 10%), so 5% of dividend will be lost to US (edit: that said the leakage is around the same as the extra TER you’d pay with most UCITS ETF)
Yes, check ictax, the taxable value and income are a fraction of the traded ones and received dividends.
(and to be precise, the income tax is being taken at the fund level rather than investor level, but the tax rate is usually favorable since it’s corporate tax rate)
First off, congrats! You are definitively in the safe zone, enjoy your freedom!
It is possible that it is matching your future expenses but it seems pretty low to me. I would double check it. I’d also allow myself to increase my expenses on hobbies, holidays and transportation in FIRE if I discover there are things I enjoy doing and I hadn’t budgeted for. I’d reassess this position a few years after fire and adjust my projected expenses accordingly.
Also, very low to neglictible cost in your budget and not legally mandatory but I would take a private liability insurance (you should be able to find one for less than CHF 100 to 200 per year depending on the coverage included). The household insurance they’ll probably try to sell you and tie to it is, in my opinion, fully optional (I don’t have it myself though I also have very few assets worth anything worth covering).
Edit: That’s personal but I’d also budget something for giving (to friends/family) and supporting causes I care for (local clubs, charities and/or political parties). That’s mainly because I value the impact I can have on society.
Don’t quote me on that but with the help of chatgpt and this and that, it seems like they base it from the taxable wealth. (and direct real estate funds is such a niche thing it’s unlikely to be taken into account differently)
edit: that said it’s just 0.3% so not really worth optimizing heavily (there’s likely a lot of other things with more impact)
IMO Numbers add up, and nothing significant missing from your expense positions.
At 1.6% withdrawal rate, I’d also go very high stock allocation.
Yeah, look at Swiss direct RE funds as a diversifier and taxable wealth optimiser.
…oh and, if you haven’t yet, consider to max. out payments to your Pension Fund (while u still can).
A foreigner goes into a Swiss bank and whispers to the teller: ‘I would like to open an account with one million franks.” The teller responds: “There’s no need to whisper - we don’t look down upon the poor in Switzerland.”
Try to retire on ~ 4.5 million as a single person with a planned spending of nearly 3k a month (without! taxes etc), that you can triple and still be within 3.5% WR and end up with worry about your ability to spend
You should run Monte Carlo simulations with scenarios including one (splurging) spouse, two spouses (with combinations of splurging/frugal), and three spouses (again with rotatting frugal/splurging combinations).[]
If you have the compute capacity, add in 2, 4 and 6 kids. For completeness maybe calculate the outlier scenario of 10 kids.
Just kidding.
You’re fine.[$]
Not entirely sure what the limit is these days …
$ I’ll refrain from suggesting any dividend payout strategies since it’s not clear whether you’re interested in passing on any of your nest egg (which it looks like you won’t ever spend regardless) and since the dividend hating wolf pack in this forum is only waiting for a weak moment of mine to tear to pieces any non capital gain strategies.
A nice position to be in, unless you’ll regret not pulling the trigger soon, that is.
100% stocks would work in theory, but I’d think twice about the fact that “you think” you can deal with market drops: the only way I see you can fuck up your plan is if you lose your cool during a major drop, so maybe a bit of bonds could help, IMVHO.
I did try to make my estimated expenses mostly accurate, based them on putting figures into ZHprivatetax and on my current spending, but I freely admit I probably missed/got some things wrong and my current spending will change after resigning.
Oh my, that was an eye opener, I never realised that spending dividends was ‘withdrawing’. Yes, makes absolute sense.
So my estimated withdrawal rate from the 4M in IB to cover 100k expenses (75k+25k safety margin) would be 1.5% dividends + 1% selling = 2.5%
A bit higher than I originally thought but it’s OK. (I cannot touch the 600k in 2/3a for 11 years so I don’t include this in estimates)
Yes, I am sorta lucky with rent at 1600/month. I came to Switzerland in 2004 and I have only lived in this one apartment so I am sorta paying 2004 prices. And it’s not central Zürich, it’s 500m within the city boundary.
I will look at real estate funds. I had a quick look now and I didn’t really understand them but I will look more.
I do plan to give to charity, first I think I will need to adjust mentally of not having a salary.
I think I could hold my nerve in a major drop. My first ETF buy was December 2019 and second was March 2020 and a few days after this was the big Covid drop. I thought “FFS” as everything was suddenly red but I knew “stay the course”. And I have the 2/3a as safety.
Some others Suggested above, there is a risk of not working and needing to find a new property without showing a salary. While you are much better positioned vs others, they may prefer a working individual as simply easier.
If you aren’t picky and geo flexible, then it’s ok as you will have time to find something
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