Hrm, ok.
As your average investor, I’d still pursure the plan @Cortana pursues.
Are you suggesting anything different?
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6 posts were split to a new topic: Invest in what matters
Can a mod or @Bojack delete hajes29a posts any everything related to it? 
This thread isn’t about optimizing investments and cash allocation right now, it’s about the 5 years before early retirement and the plan afterwards.
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A bit late to the party, and very little to add. Just to emphasize some inputs others made already (especially @PhilMongoose, @xerox5003 and @anon17469660), specifically to your questions:
Not a bad idea, but I’d suggest investing the 7% cash in equities instead and overall skew your equity portfolio to achieve a decent dividend yield (covering basic needs). This addresses the sequence of return risk better I believe, also from a psychological point of view.
Go for high(er) bond allocation in pillar 2/3, which will long-term have higher taxable return vs equities. The great benefit in Switzerland is that capital gains are always tax free, so make use of a high equity allocation in free assets. Also: Do you have access to a pillar 1e and already today the possibility of a high equity allocation in your pillar 2? If yes, what if that changes? If no, how do you plan to completely restructure your portfolio upon retirement? The answers to those questions are again an argument to keep a decently high bond allocation throughout in retirement assets.
You need a global view of your portfolio. And as said before, if you keep a high bond allocation in pillar 2, you should be able to always easily balance to target allocation through your free assets. Keeping all parts of the portfolio at the same allocation is a nice thought, but doesn’t work in reality.
Dividends. We all know this isn’t ideal long-term and technically slightly lowering expected returns, but the lower volatility and regular cash returns aren’t to be underestimated. Having reached my FIRE target a few months ago (without RE), I went through the phase of securing my FI and reducing my sequence of return risk in the last three years as getting FI became a tangible, real outlook, and believe me: FIRE is as much a psychological exercise as it is a financial one. So again: Dividends (and bond interest) to cover your basic needs.
Great plan, very similar to my own. I am sure you will get there.
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I think maybe FIRE is more a psychological exercise than it is a financial one.
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Interesting plan. Which CHF corporate bonds do you use to manage liquidity/cash mgmt? I think 150k just in cash shouldn’t be an option. Or do you guys have some tips what to do with cash you could need in mid or short term.
What’s wrong with cash? It’s almost always better than the government bonds (because no taxes), and it’s less risky than corp bonds.
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Maybe someone could update Short guide to CHF fixed income options (funny how the cycle goes, this was created when we started having positive rates again, and now we’re back at 0)
As another option, there’s e.g.
https://www.moneyland.ch/en/mediumtermnotes/list
But given tax, I’m not sure I’d bother for 0.1%-0.3% vs. 0% in cash.
For the companies lending to their employees, you’re giving up on esisuisse’s insurance and they aren’t regulated like banks so you are taking on more risk for a (potentially slightly) better reward. Chances are they’re lending to you at lower rates than they could get from institutional lenders, which is why they’re doing it, and which would mean the risk adjusted returns are likely not on par with what you can find on the market. There again, you do have some level of insider information when it comes to your company and depending on what you know of their actual financials, you may face a reduced risk vs the market so could lend to them at lower rates (not the average employee, I guess, you’d have to work at the higher levels or in accounting).
Using a friend working at a bank introduces counterparty risk. You have to trust them and could face hassle in some fringe cases (say they die unexpectedly). If you work it out as an actual lending agreement that allows you to get more interests than you would have at a bank yourself, the risk adjusted returns are probably still below market rates as your friend’s creditworthiness would probably not get them sub 1% interest rates unless the loan is collateralized (which, I guess, you could do but that’s not the kind of relationships I would want to have with my friends for a few tenths of a percent of interests on cash).
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Lately I’ve been thinking about how to properly account for AHV contributions, taxes and the eventual AHV pension. After crunching some numbers I came to a few interesting conclusions.
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First, I think the AHV pension should be factored into your SWR calculation. The cleanest way is to calculate its present value and add it to your net worth before applying the 4% rule. Example: 2.5M NW at age 50, planning to take AHV at 63 (roughly 26k/year). Present value of that pension: 26k / 0.04 / 1.04^13 = ~400k. So your effective base is 2.9M giving you 116k/year, which is 4.64% of your actual NW. Once AHV kicks in 13 years later withdrawals drop back to ~90k (3.6% of the original NW).
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Now the interesting part. Taxes as a non-employed person are basically wealth tax (0.21% in AG) and dividend income tax. AHV NE contributions are also tied to your taxable wealth. When I ran the numbers, these two costs combined almost exactly offset the SWR boost you get from including the AHV present value.
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In other words: you can just use 4% of your net worth as your FIRE budget, ignore taxes and AHV contributions in your monthly planning and it roughly balances out. The present value of your future pension covers those costs.
The practical conclusion is that my actual FIRE number is a bit lower than I initially assumed.
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Interesting. I like pragmatic solutions based on math 
(ETA: you might want to add a disclaimer that while it might work like that for your individual financial situation, it’s not a rule of thumb that can be applied to everyone, reason being that the numbers could be wildly different from yours.
E.g. the offset would not work for someone with a high NW but having only worked in CH for a fraction of their career and on the other hand would be largely underestimating the benefit of 26k AVS for someone with a much lower budget and NW.)
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Good point. Someone migrating to Switzerland at 35-40 still has to pay the same AHV contributions and taxes as me, but will have a significantly lower AHV pension.
Still, accounting for AHV pension by adding its present value makes sense for everyone IMO (and adding taxes and AHV into the budget). The only exception might be if you retire very early and AHV is still 20+ years away. Then I wouldn‘t account for it at all due to sequence of return risk and consider it a longevity insurance.
I like the simplicity but accuracy enough of your calculation.
To see if I understand properly, are you saying that, in your situation, the AHV pension and taxes paid after retirement cancel each other out (regardless of the present value of both since you’d have to apply the same calculation to both too)?
How do you account for inflation (or is accounting for inflation irrelevant) since AHV income is somewhat adjusted to it but taxes aren’t?
How do you account for the AHV and tax contributions between the start of your early retirement and when you start taking AHV? Also via a present value calculation? Or is it already included in your calculation?
In case it matters, how did you come to the 4% discount rate for the calculation of the present value?
Tax brackets are also inflation-adjusted in Switzerland (Ausgleich der kalten Progression). Usually every two years, if I remember correctly.
For the AHV income adjustment, a mix of price and salary index is used, so the adjustment may not exactly match but I’d consider it close enough for FIRE calculations.
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Yeah, the rule of thumb wouldn’t work for many people who started their career outside of Switzerland.
But +1 on counting the present value of the future AHV. Could you explain why you used 4% as interest rate? Seems quite concervative to me, I personally use 2%.
11 posts were merged into an existing topic: Mandatory Expenses once FIREd