FIRE in 2 years – what is wrong with my plan?

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I want to stop working badly. There is just so much stuff to do. My kids are now entering puberty, this is my last chance to be a meaningful part of their lives, help them with increasingly challenging studies, be there for their sports events, to motivate them and share with them. My body needs care, I want to have more time to lift weights, do yoga, walk, just be active. My ex-colleagues are writing a book and are asking me to contribute. There are many days when I just don’t have time or brain power for work. I am absolutely ready mentally. But am I ready financially?

In my ideal world, I would get fired by the end of this year and spend 1.5 years on unemployment benefits. But if that does not happen, I can continue working another 1-2 years without putting any more effort than necessary. In any case in 2 years my situation will be the following :

Age: 52 (same for my spouse who would also ideally stop working at the same time)

Cash buffer against volatility: 200K

Stocks: 1.4m

2nd and 3rd pillar: 2m

House and mortgage not taken into account.

My (and my spouse’s) steps before / when stopping work: split 2nd pillar into two market-invested vested benefit accounts in VIAC and Finpension. Rebalance stocks to basic ETFs. 3rd pillar is already in VIAC in 5 accounts.

Annual expenses: 120K (in downturn years can be decreased to 80K), including mortgage, AVS payments and fortune tax which will be ranging from 12K to 30K+ later on.

I assume market growth of 4%. In case of ups or downs, I am protected by my cash buffer and dynamic spending. The actual growth should be higher but I only use 4% so I don’t have to account for inflation.

So according to my calculations:

  1. Age 52-59: live off the stocks, i.e. 1.4m for 8 years. This looks more than enough, and due to stocks growth, I would only deplete it to 0.9m by age 60. Risk management through cash buffer and dynamic spending. 2nd and 3rd pillars invested would grow untouched and untaxed to reach from 2m to 2.6m.

  2. Age 60-64: tax-efficient liquidation of 2nd and 3rd pillar over 5 years, consider moving to Schwyz, using individual taxation of spouses, assuming 10% withdrawal tax (can increase). Moving all we don’t need to live on into ETFs. Will end up with 3.3m in stocks

  3. Ages 65-90: AVS around 40K per year. Consider moving abroad to save on fortune tax (some family live in EU and there are no capital gains and no fortune tax in this country, however need to be careful as some ETFs cannot be traded in EU). In this case, spending can go down to 100K (like i mentioned, the plan is not accounting for inflation, but only counts in 4% market growth). so only need to draw 60K from my 3.3m in stocks, which is around 2% rate.

  4. Age 90: die and leave 6m to kids (however of course will start gifting earlier so they can retire by 40!)

What’s wrong with my plan? What am i forgetting / underestimating? Thanks for pushing back on any assumptions!

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Congratulations! It looks like you built a nice setup for retirement.

If you plan to pay off some mortgage, you can also use against pension pots, this might help you bring some out earlier which depending on canton of taxation can be beneficial to spread it over more than the 5 years you already plan.

Depending on how you do it, you might be able to spread over an additional 4 years.

Don’t forget you’ll be paying wealth taxes and AHV on capital after you stop working.

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Thanks! i did account for AVS payments (around 5k per year) and for fortune tax. Fortune tax really starts biting after liquidation of the 2nd pillar, to the extent that most of our AVS after 65 will go to pay fortune tax. This would be a real drain on assets with no income to absorb it. Which is why i am sadly considering moving after 65. We will see!

And thanks for the mortgage repayment suggestion! did not think about this strategy. I am just so attached to my below 1% mortgage at the moment. but if it goes up, this absolutely makes sense

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Your plan sounds sound and your assets should carry you.

My remark would be that you seem to ascribe too much certainty in the future evolutions of your assets. Large variations in price fluctuations can happen.

It can be 0.9M, it can be 0.4M, it can be 2M. The future is uncertain. I would not be too worried, 1.4M should carry you through 7 years to bridge until you can get access to your 2nd and 3rd pillars, especially if you can reduce your expenses if necessary.

It can be 3.3M, it can be 1.8M, it can be 4M or 5M.

I would indeed strongly consider gifting earlier while focusing on helping them build a resilient mindset that encourages good financial management on their part. There are periods in life where additionnal assets make a huge difference that it won’t make later on. Specific life projects, marriage, children, house building/buying, etc.

Inheritances that come past the time when their potential own children would have left the house probably would happen too late when compared to the impact they could have had.

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+1 it can be a good idea to model ranges rather than a fixed number when dealing with volatile assets.

Since 2008 people forgot that stocks don’t always go up (there were only two negative years, non consecutive)

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In your case - at your age - I’d do a simple back-off-the-envelope calculation (as a sanity check, if you will):

Assets / yearly expenses = years
3.6m CHF / 80‘000 CHF/year = 45 years left.
:backhand_index_pointing_right: You‘re good until the age of 97, as long as your investments keep up with inflation (which is more than reasonable over longer terms)

And you‘ll have AHV and the residual value of your house on top of that.

consider moving to Schwyz, using individual taxation of spouses, assuming 10% withdrawal tax (can increase).

Schwyz can be useful but often is overrated for its taxes on capital withdrawal from pension schemes, IMO. Its tax rates start very low for smaller but are more progressive than other cantons:

:backhand_index_pointing_right: Why move to Schwyz and pay up to 9.55% tax - when you can pay only 5.xx percent in Chur, Stans or Schaffhausen for your multimillion Franc withdrawal?

(side note: if you’re non-resident, why move your funds to a Schwyz-domiciled provider - if you’re eligible for a refund of - or tax credit for - Swiss tax anyway?)

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Thanks, yes, of course you are right. I forgot that i was looking at this handy table on finpension site comparing withdrawal taxes, and I think AI was the best canton. But with politicians throwing around ideas to increase the tax rate on withdrawals, something like this may unfortunately be a necessity (especially as i am now in one of the highest tax cantons in the country).

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I didn’t make the maths, but Geneva has a tax shield for wealth tax. Maybe there are ways to structure the wealth to take advantage of it?
Just a not well thought-out idea I had, seeing you appear to be assets rich but relatively income poor, and it’s supposed to help in this situation.

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Thanks for the suggestion! it’s interested, I looked it up and did some (quite confusing) math with the help of Google AI. It seems the tax shield only comes into play at a much larger fortune size than mine would be.

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I’m also happy to continue renewing while rates are <1.5%, but if it ever goes up a lot (and let’s face it, over the next 40 years, it is probably going to go up), then I will consider paying it off with the pension.

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Congratulations! This looks super safe. By the time (un)employment income disappears but before accessing the large pension pillars, you can probably afford a higher cash (safe asset) allocation to reduce risk further. Say 600k (For >= 5 years of spending) instead of “only” 200k cash.

Making sure you are aligned with your spouse sounds like the most important issue right now.

Next, secure long term financing for your home before retiring in case you need and want it.

Good luck!

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I quite regularly see people suggesting that unemployment benefits can be part of an early retirement plan.

In my view, that misses the purpose of the system. Unemployment benefits are there to support people who have lost their job and are actively looking for a new one. They are not meant to finance early retirement.

Biggest reason why the Swiss system works so well is that most people follow the rules. If more and more people started treating unemployment benefits as an early retirement subsidy, the system would become less fair and more expensive for everyone else.

When planning for early retirement, I think the way to go is to finance it with your own savings/investments, not with benefits, that were designed for a different purpose.

just my 2 cents.

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Also, as a practical matter, though it may be a matter of personality, getting unemployment benefits while actively avoiding getting hired can be pretty difficult (if your field is actually hiring).

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You’re arguing against a caricature rather than reality.

Nobody is entitled to unemployment benefits merely because they want to retire early. To receive benefits in Switzerland, you must satisfy the legal conditions, remain available for work, and comply with the requirements of the unemployment office. If someone does that, they are using the system exactly as designed, whether they have CHF 5,000 or CHF 5 million in their brokerage account.

More importantly, unemployment benefits are not a welfare handout. They are an insurance benefit. Employees and employers are required by law to pay into the system throughout a person’s working life. If an insured event occurs and someone meets the legal conditions, they are entitled to claim, just as they would with any other insurance.

The “you should use your own savings instead” argument is especially strange because it ignores how the system is funded. Many high earners contribute substantial amounts over decades to a scheme they have mandatorily funded, while the benefits themselves are capped. In other words, people can pay premiums on compensation that is far higher than the maximum benefit they could ever receive. The system already contains a significant redistribution element. Suggesting that people who have contributed the most should voluntarily forgo benefits they are legally entitled to simply because they also saved and invested responsibly amounts to asking them to subsidize the system twice.

We don’t apply that logic elsewhere. Nobody argues that wealthy people should decline their AHV pension because they can afford not to receive it. Nobody tells someone not to make a claim on their fire insurance because they have enough money to rebuild the house themselves.

The fairness argument cuts both ways. Someone who spent everything they earned can claim benefits after job loss, but someone who saved diligently is expected to subsidize the system without ever using it? That creates a perverse incentive against financial responsibility.

If the law says a person qualifies, then they qualify. If society wants different rules, change the law. But portraying people who legally receive benefits from an insurance scheme they have mandatorily funded (potentially for decades) as somehow abusing the system is a moral judgment, not an argument.

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I think we’re closer in our views than it may seem.

I fully agree that anyone who meets the legal requirements should receive unemployment benefits. My point is that someone who has effectively retired early doesn’t meet, in my view, those requirements.

The purpose of unemployment insurance is to support people who have lost their job and are actually and actively seeking new employment. If someone has already decided that they no longer want to work and they intend to live off their assets, then they are no longer participating in the labour market.

I also disagree with the argument that paying into the system for many years creates an entitlement regardless of the circumstances. Insurance works differently. We all pay premiums for risks that may never occur. Someone who pays fire insurance for 30 years doesn’t become entitled to a payout if their house never burns down.

Likewise, paying unemployment insurance contributions doesn’t create a right to benefits unless all the conditions are met. The key question is therefore not how much someone has contributed, but whether they actually are unemployed and actively available for new work.

That’s why I think it’s problematic, when unemployment benefits are discussed as a planned component of an early retirement strategy.

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I think we’re actually discussing two different issues.

If someone is not genuinely available for work, then I agree they should not receive unemployment benefits. That’s already what the rules say.

What I find interesting is that many people seem highly concerned about claimants potentially receiving “too much” from the system, while showing very little concern about how much certain groups are forced to pay into it.

My suspicion is that the vast majority of people who are perfectly happy to “enjoy” unemployment benefits while taking a breather between jobs would also be perfectly happy with much stricter payout rules if those stricter rules were accompanied by more reasonable contribution rules.

After all, unemployment insurance is not welfare. It is insurance. Yet it is a rather peculiar insurance. The insured salary is capped, but contributions are not.

Let that sink in for a moment.

Imagine being required to insure your CHF 2 million house and being charged premiums based on the full CHF 2 million value. Then, if the house burns down, the insurer informs you that the maximum payout is CHF 120,000 because coverage is capped. Most people would immediately recognize that as a highly unusual arrangement.

Now imagine the insurer adds: “And by the way, you own a second home, so you really shouldn’t complain about only receiving CHF 120,000.”

That is essentially the logic being applied here.

The people most often criticized for claiming benefits are frequently the same people who have contributed disproportionately large amounts into a scheme they were legally required to fund, while knowing from day one that their potential benefits were capped far below the income on which they paid contributions.

So before we start moralizing about whether someone should voluntarily decline benefits they are legally entitled to, perhaps we should also ask whether the contribution side of the equation is equally fair.

If we’re going to treat unemployment insurance as insurance (which it is!), then look at both the premiums and the benefits, not just the benefits.

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Unfortunately, you have neither the option to choose whether to take this unemployment insurance, nor choose who insures you. So it feels more like a redistributive tax in disguise.

It would be good if this was opened up to competition so we could choose insurance providers and level of coverage.

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Fully agree. Alternatively, eliminate premiums over the capped amount of coverage. In fact, eliminate all premiums, shift the premiums for the capped amount of coverage to regular tax rates and keep things transparent this way.

I am overwhelmingly positive about the Swiss system (taxes, social benefits, etc.) and feel like you really get ‘value for money’ for what you pay into the system, but fundamentally have a deep distaste for what you refer to as redistributive taxes in disguise. I’m for a progressive tax system, but not one which goes beyond the actual tax system.

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Lot of imagination required here. However, contributions are capped…
Well, there was some temporary measure with 0.55% premium above the cap to fix the finances a few years back, but that’s gone.

OP wrote:

That doesn’t really sound like an intent to be available and actively search for work. Since OP asked for feedback on his plans, it seems fair game to call that specific idea out, without going down the rabbit whole of challenging the whole system or seeing ghosts in this thread.

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The contributions over the capped benefits are a redistributive measure.
Edit: as pointed out by Brndete, the contributions are capped for a max salary of CHF 148’200.

The insurance itself, in my view, allows to reduce social disturbances in case of unemployment, in particular for people with dependants, while allowing the very liberal Swiss system that allows for firering without cause, which helps the economy and also simplifies hiring decisions (so benefits both employers and employees).

I don’t see the in insurance itself as a redistributive tax and I don’t think it’s what is being asserted here (feel free to correct me), though the setup of the premiums and benefits is (which is the point I understand is being made).

I just wanted to point out that the Swiss unemployment system is a net gain for the competitiveness of the Swiss industry and in this case at least, that gain is a benefit for both the employers and the employees.

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