Could similar moves in more countries threaten FIRE if pension funds are locked up for longer?
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I think retiring at 58 would become the new FIRE 
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I don’t understand the facts: the article says retirement age has been tied to life expectancy since 2006, yet that it is a new law that sets the retirement age to 70 by 2040, how is the life expectancy adjustment implemented and what does this new law change?
I think the situation is different if the framework is “people should have x years of healthy life in retirement on average” vs people will have less and less retirment years going forward.
I think “threatening FIRE” is a strong wording. Being serious about FIRE means saving way more than what can be put into pension assets. Delaying access to retirement assets might push FIRE people toward a change in mindset, where instead of targetting a permanent withdrawal rate, we’d target two separate depletion rates, one aimed at reaching 70 with a set amount of assets and one past 70, assuming less than a 30 years retirement and depending on the actual pension system of each country.
All in all, I find positive that we have different retirement models competing as it will allow for more comparison and competition to find the best approach on a societal level. FIRE people will probably keep geo-arbitraging alive.
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LOL, you’re right. In 50 years it’s:
- Ooh, look at Mister early retiree over here stopping working at 65
- Just turned 70? Now is the time to start planning for your retirement!
- Think about adding bonds to your portfolio with the formula 200 - age
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Very, very coarse modelling from my point of view of both savings and enjoying life some with a target savings rate of 30% of gross income on top of the second pillar savings.
Getting access to retirement funds at 70 rather than 65, you’d still roughly work for 20 years so your FIRE starting date wouldn’t change. What changes is that you might want to stop contributing to 3a before reaching your start of FIRE date so that you have enough to deplete in taxable to reach 70 with the target net worth that you’d withdraw from 3a and your vested benefit account (2nd pillar).
Starting salary, expenses, taxes, savings rate, target SWR and actual returns and inflation would change it quite a lot so it’s a single modelling (not even data) point but it tells me that there should/could/might be enough room from building wealth in 3a vs outside of it for it to cushion a delayed access to pension assets provided a high enough savings rate (which is at the core of the FIRE mindset).
This is effectively just an elaborate way to pay people less retirement.
You are already borderlien unemployable with 65, no one will want to employ 70 year olds. So people will have to take earlier pension with penalties. And judging by current trends, that won’t be much.
Europe will be zombie continent in 30 years.
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Borderline? 65? In my field and among our clients you barely see people over 50, 55 at most. Walking around the Novartis and Roche HQ you won’t see anyone - anyone - who looks 60+.
Word on the recruiter street is that jobs don’t even consider people over 40 for hands-on content development, and only consider over 50 to buy into their networks. It’s shocking. I know highly skilled and senior people who lost their jobs at 50 and have to freelance as literally nobody will employ them.
It’s really shit and it’s by far the biggest driver I have for saving. Understanding how screwed public pensions and private sector jobs are were my wake up call to start thinking about FIRE.
I feel I need to be seriously planning an exit from the private sector fairly soon.
LOVELY QUOTE and so succinct, I’ll nick it!
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Having said that, when average age would be above 50, then not hiring people above 50 wouldn’t be an option. Eventually workforce mix will change so companies cannot just hire from half of the working population
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Yeah, maybe. Maybe governments will incentivise quotas and positive actions because they are such an elegant way to deal with a problem /s.
Either way it won’t catch people who’re 40-50 today, and overall I believe banking on others’ fairness or reason is stupid.
The issue is if one is not permanently FI they are at the mercy of other people and that’s a terrible place to be. Pensions in Greece were cut by 30-50% in the heat of the financial crisis, and I am
very much on the fence about it. On one hand the obvious question would be “and you worked 30-40 years without saving a penny for a rainy day?”, but their argument would be that they depended on the state to honour the commitments it made to them 30-40 years ago. That said, the doom of public pensions was accurately predicted back in the 90s and a comprehensive and gradual reform plan was proposed which would have saved everyone and possibly the country too, it is now known, but the minister who lead it got death threats and resigned. So the very same people who complained in the 90s were the ones losing their pensions in the 2010s (the wolf, the damn wolf eventually does come).
Of course they wouldn’t ever admit it because most people are neither logical, fair, self-aware, or able to critically think about anything more complicated that taking a dump, it’s always someone else’s fault…and that leads to polarisation, populism, authoritarian politics coming to power…a whole load of shit. So yeah, saving for FI is critically important.
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Totally agree that Financial independence is key. However I think it’s not so easy for everyone to achieve it.
Think about it -: 20-40% of gross personal income goes into pension contributions in Switzerland (accounting for 3a, 2nd pillar & AHV) depending on age. If this money will not be available for the people to spend then why are they contributing?
In addition, when such a big portion goes into pension assets , it leaves less for taxable account contributions. Thus only people who can afford to FI are the ones who have high savings rate.
Personally I think Swiss system is good as it allows money to be taken out as early as 58 and also for buying a house. At least people can start enjoying some benefits when they are still healthy. Or else all pension money will be spent on healthcare 
I understand that retirement ages are increasing because life expectancy is increasing. This means state needs to support longer. But for different countries state support is different.
For example - in CH, only AHV supported by state. So if they raise retirement age, then access to AHV will be delayed. Which is understandable. But - access to 2nd pillar and 3a should not get delayed too much. Govt has no contribution to 2nd pillar and 3a , it’s all personal money.
P.S -: Gross personal income includes full compensation I.e base salary, bonus & employer contributions to pension funds.
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It depends on the salary and whether one even has a 3a or not. 40% sounds huge and unrealistic. I think my own AVH and 2nd pillar contributions are 15% of gross, so even with 3a it’d be nowhere near 40%, and the higher a salary is the lower the total %. I say “I think” because frankly I don’t pay much attention to my payslip.
Agree with the rest you wrote though, especially that a mix of state, mandatory private pension with some reasonable conversion rate, and optional private pensions is the saving grace of a pension system, but I don’t know how common it is around the world.
Yeah I think it depends on pension plans
But as far as I know AHV contributions are 11% of income (employee + employer)
2nd pillar can range from 10% to 30% depending on companies (employee + employer)
3a is on top.
By the way if someone don’t contribute to 3a, most likely their savings rate is also low
If they increase AHV age, I’d imagine it would be for all pillars.
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Well eventually it will go up in Switzerland too. But I guess it won’t matter for us. I don’t need AHV if I plan to retire at 50 anyway.
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I went up for women a year ago, and it indeed went up for all three pillars IIRC.
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The retirement part of OASI is 8.7% of gross salary (4.35% by the employer and employee, each).
The disability and loss of income parts (the use for which should increase with a more lengthy period of working) are 1.9% of gross salary (0.95% by the employer and employee, each).
The cotisations for the 2nd pillar varry from 7% (3.5% each) to 18% (9% each). For a career path from 25 y.o. to 65 y.o., 10 years of the 40 years career are spent on each slice so I’d consider that the mean, at 12.5% can somewhat be representative (it is not, people reduce their work-time, encounter hardship, start later, etc.).
So the very top required by current law would be 26.7% for a 55+ year old person, of which 13.35% are paid by the employee and 13.35% by the employer.
The mean would be at 21.2% total, so 10.6% for each the employee and the employer.
Except for the lowest incomes or people with (temporarily) higher charges (like children), I think it leaves some leeway for extra savings. Those can be done through 3a but they don’t need to.
I don’t think the retirement system in Switzerland prevents most people from saving toward FI during their working years. It’s more of a mindset thing: Swiss workers expect the government to tell them when they’ll retire and to take care of them during retirement. The system does reinforce that as a combination of 1st, 2nd and 3rd pillar should provide with a fairly decent retirement. Extra savings, in the mind of most of the Swiss people I’ve talked to about the topic, would come in the form of amortizing the mortgage of a own home.
Saving more and investing in other assets hasn’t crossed the mind of most people I’ve talked with about it.
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And I think it does. Because one can start drawing earlier as well.
Would be interesting to see as life expectancies have increased if employability expectancies also have increased or not. Otherwise higher life expectancy will be just a cost to the person.
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Just a side-comment:
It’s probably very rare, but this can also be 0% for the employee (employer covering full contribution).
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If it’s easier and less cheaper to hire outside Switzerland than a +50, the company will do it.
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Isn’t that true for any age?
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