Personally I have supplementary insurance which covers treatment abroad. It is included in my FIRE budget along with the deductible
For me it makes no sense to RE if I could instead work a while longer to be able to afford better healthcare as I get older. The chances of having cancer etc. increase every year
I also plan on a low Safe Withdrawal Rate ~2.5% so it is probable my assets continue to grow. I hope any illness happens far enough in the future so I could afford to pay cash for any new treatment that may not covered by health insurance, or e.g. a carer at home instead of an old folks’ residence, if I need it (so basically, self-insure)
To continue the AHV discussion: an interesting thing for me is that my girlfriend and concubine (we have three children together) wants to continue work (she likes it, she would keep the 50% she has now).
For me I would probably need a big spreadsheet to see if it is worth to marry her to avoid paying AHV (she would make enough to compensate for me), compared to joint tax declaration etc
I can imagine the romantic proposal: “please marry me so I can jump on your AHV wagon, thanks”
OK well you are playing it pretty safe. May I ask you how much are you accounting in health costs (insurance +) for your family (if you have a SO) as a % of your yearly RE budget ?
With current costs and especially their growth rate during the last years I see it as a real danger for our financial safety in the long term. I doubt my assets will be able to keep up…
Let’s pretend we consider a cash flow of 60 k/year of which 15 k/year would be eaten (today) by health costs. So 25%. In 20 years it might very well double → it would suddenly account for 50% of our expenses
when not working, you have to register as a « person without money-earning activity », and the annual contribution you have to pay for AHV is calculated based on your pension and fortune
if your spouse works and pays more than twice the minimum AHV contribution, then your annual contribution is considered as paid
AHV will not chase you, you have to register yourself proactively.
That is true and can be quite a hefty amount if you use the online calculator. (Of course when you FIRE as a millionaire that is not much but still more than having to pay nothing if your wife/husband still works).
Canton Zurich for example states that there might be reductions but you have to contact them for definitive answers:
Wenn der erwerbstätige Ehepartner oder die eingetragene Partnerin einen beitragspflichtigen Jahreslohn von mindestens CHF 9494.00 brutto erhält oder ein selbständiges Jahreseinkommen von mindestens CHF 18’400.00 erzielt, entfallen unter Umständen eigene Beiträge. Die Ausgleichskasse prüft auf Anfrage die individuelle Situation.
I tried to capture that topic in this thread. [Edit: links to post above as threads were merged]
Summary: If you retire early in CH you should pay AVS contributions calculated as 0.2-0.3% of your taxable wealth (exception if your spouse works as per comment from @jmp above)
There are restrictions to block this loophole (see thread referred to above).
Is there any ROI on AVS/AHV somewhere here ? Like maybe investing that money is better than paying AHV/AVS, depending on opportunity cost, age etc. Additionally if you stop working at 50, you may already have 32 years of AHV paid. Maybe there is some optimal number like “paying another 3 years then stop and investing because marginal increase of AHV “salary” is not as big as opportunity gain loss”.
I would be curious if anybody had run the numbers or so. I don’t really know where to find the information or have time right now to try it.
you are right of course, my first monday’ brainfart.
I remembered a comment of my mother about “not forgetting to still paying AH” for my brother but it was because he moved away in East Asia, not because AHV is optional somehow got mixed up in my head.
This is a good point for Swiss nationals that RE (or not) abroad. From what I understand, paying AVS/AHV is optional in this situation, so calculating ROI is interesting. I guess how many years you’ve already contributed plays a big role, not just how much you expect to pay per year.
I know some on the forum are quite knowledgeable about how 1st pillar pension works and is calculated, any inputs?
Please continue on the other thread mentioned by Barto
IMHO, AHV is like a tax. I won’t lose sleep on it AND also it’s relative to your worth, unlike health costs that are balooing and they won’t go down if you become poor.
For 2 adults + 3 kids it is a bit over 20k CHF/yr.
To fund this needs >800k CHF assets to fund it assuming 2.5% SWR.
Food, rent and health are the no-miss items for me
[Edit: of course once 3 kids leave the nest cost decreases, and above assumes payment of full deductible every year in reality I only ever reached the deductible once in 20 years… but I get older…]
If/when you reach a point where you frequently have to pay the full deductible, you can and should switch to the minimum CHF 300 deductible, of course. This obviously increases the premiums but by less than the maximum deductible.
I.e., for the long term worst case / SWR, I think it makes more sense to use the scenario with the minimum deductible as basis for the calculation.
28k/year AHV is potentially a big difference longterm. You’ll reduce your portfolio withdraws from 100k down to 72k per year (assuming 4% rule and 2.5M networth) and thus down to 2.9%. Or down from 80k to 52k (assuming 4% rule and 2M networth) and thus down to 2.6%.
This will ensure that you’ll never run out of money.
IMHO 7k is a really small social contribution if you sit on 3m chf and is IMHO not worth for all the part time hassle and (pseudo) work not even mentioning the swr offset the ahv generates after reaching the official retirement age.
Also keep in mind that it presumably only applies to taxable wealth. If e.g. 1 Mio. out of your total 3 Mio. net worth is in pillars 2 and 3a, you only pay AHV on the 2 Mio.
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somehow got mixed up in my head.