motivated by this thread on how to cash out 2nd (and 3rd?) pillar by becoming a temporary “freelancer”, i tried to evaluate how beneficial this is. Should i consider this at all???
I came up with this spreadsheet:
where i compare a lump sum or yearly feed (or combination…) going to 2nd pillar or a stock heavy mustachian portfolio.
basically this tries to equate the lousy return of pillar 2 in accumulation phase vs. the quite high return of 6% (probably even less…) during retirement phase, and benchmarks it vs the stock portfolio.
2% pillar 2 yearly returns
4% stock portfolio yearly return
4% safe withdrawl rate
retirement age 65
the result is, for every Swiss frank existing in pillar 2 or the stock portfolio, a yearly and constant pension beginning at the age of 65 will be paid out:
- 0.122 CHF from pillar 2
- 0.164 CHF from the stock portfolio, 34% more (wow!)
if i start this calculation at later age, the advantage of the stock portfolio shrinks:
- age 40: 10%
- age 50: -10%
- breakeven around age 45, so don’t cash out after that
In summary, i will dig a little deeper and may attemt to cash out my current 2nd pillar, for maximizing returns!
- The Umwandlungssatz is going to decrease below 6% in the long term => correction reduces pillar 2 values
- interest rates my vary => could go in both directions
- taxes not reflected => probably favoring pillar2 if corrected for
- retirement age for my generation may rise beyond 65 => correction favors stock portfolio
- in the stock portfolio case, the one swiss frank grew to CHF 4.104 which you’d own as liquid funds. with pillar 2, this is not the case as your stash “vanishes” when you decide for pensions => clearly a plus for the stock portfolio