woho!! fingers crossed
2nd Pilar is not only there in order to cover (part of) your pension. It also covers substantial risks.
So also this parameter should be taken into account when moving. (Though I believe that you have already digged into it)
Regarding vested pillar 2 some interesting facts I learned yesterday:
- There is a tax advantage of having more than one accounts (in the form of vested pillars). You can pay them out in different years and save taxes.
- If you need to put your money to a “vested pillar 2” you must not put it into one. You can define two different accounts and split it 50/50.
- If you move outside of Switzerland but still inside the EU by the time you can and want to withdraw the money you have to pay taxes (Quellensteuer) on the money depending on the place where the vested pillar provider is located.
This is all very intersting to me. I must admit I have not given the second pillar much thought. So it looks like I dont have a “vested” part of second pillar. Is this something you only have when you earn more than 84’600 per year?
2nd pillar is actually an investment bucket where you usually can’t decide much. You have to take the one your Employer gives you. You have the coverage and plan your employer decided and pay as much your employer decided.
In terms of options there is a basic 2nd pillar level that is defined by law and every employer has to offer. But every employer is allowed to offer more than the basics. Here there are big differences and the second pillar coverage should be something to be taken into account before deciding for a new job.
The second pillar is (like the 3a) money you can’t withdraw without meeting some special conditions:
- Building / buying a house to live in (Within CH or near the border)
- Becoming self-employed
- Moving outside the EU/EFTA
A vested 2nd pillar occurs when you have money in the second pillar but you can’t hold it in the second pillar your employer offers. This can happen when:
- You don’t have an employer anymore (and you can’t or don’t want to withdraw the money). This can happen in a number of ways. Example: You change your job but take 2 months’ vacation in-between. Your old employer must transfer your money somewhere. You don’t have a new employer. So the money is transferred to a vested 2nd pillar of your choice. (After you go to the new employer you should move the money to his 2nd pillar but nobody tracks that. So you could “forget” to move the money after two months to the new employers 2nd pillar. This does happen a lot.)
- The second possibility for a vested 2nd pillar is if the second pillar of your new employer should be smaller than the money you bring from your old employer with you. Generally this can happen either when you move from a very generous 2nd pillar to one that offers only the basics or (more seldom) if on your new job you earn a lot less than in your old one (so the corresponding second pillar should be much lower than the one you had). Then your new second pillar can’t “hold” all the money you are bringing with you and some of it has to go to a vested 2nd pillar.
The decisions you generally can make in your second pillar are:
- To add money into it. See here
- To remove money if you meet one of the precondition mentioned above
- Depending on your concrete second pillar you could:
a) have some flexibility about when and with how much money to retire
b) decide who gets the money in cases where you are not married and have a partner
If I understand it correctly @josh is in a quite special position where (a) he has some vested 2nd pillar and (b) can decide which 2nd pillar his employer will choose. This is for most people (especially the second one) quite seldom.
What is interesting as a thought for me is to include the 2nd pillar in your investment strategy. Generally your second pillar is not, ore very little exposed to stock markets (mostly because of the legal framework behind it). If you take this into account you could be exposed with the rest of your portfolio.
I was wandering for a while if I should start to have a detailed budget… You motivated me to download the app today.
Let’s see if I will have the same experience with you. If so I will owe you a big thanks
I see the point that the 2nd pillar is not optimized in terms of future returns, I agree 2nd pillar gives you shitty future returns… The system is not sane on the long term and looking for alternatives seems legit
However, if you are planning to take some money out of your 2nd pillar in a “freizügigkonto/ compte de libre passage”, I urge you to consider the impact of an accident resulting in a disability on your financial situation, especially if you have a family relying on you. I know that some employers include a part of disability/death insurance in the 2nd contributions, and you might want to get an insurance against these risks.
Since you are young, your stash might not be sufficient to cover several decades of disability… I know that mustachians do not like insurances but I do believe that you should insure against risks that you cannot afford.
That is a very valid point. However, as this is already a vested benefits account, I will optimize it as much as possible until such time that it needs to be reincorporated inside the main pension plan. As explained, my previous employer had a VERY generous Pillar 2 plan, and because of that, there’s about one year worth of it simply sleeping in a 0% interests vested benefits account.
As switching Pillar 2 pension for a whole company is not something to do lightly, I reckon I have about 6-12 months before such time as I would be able to reincorporate this money into the (new) pension plan.
Hi @a2ithaka - we don’t use YNAB but a free alternative with, however, less features (Everydollar), and it was eye-opening in many, many, many ways. I cannot recommend it enough, choose any budgeting app you want but choose one, and give it 6-12 months. I would be massively surprised if it didn’t make a huge difference.
Thanks @Susanna for the recommendation. To be honest YNAB was too complicated for me… So maybe I will give every Dollar a try
EveryDollar has a nice, easy-peasy, for-dummies User Interface - just bear in mind that it’s not very adaptable or flexible and is only in USD - we ignore this and just put in our numbers in CHF. But it is an excellent beginning for whoever wants to start budgeting, and has changed our life and our outlook on things. By finally budgeting everything, we have been able to see the structure of our spending, prioritize, cut some things we don’t really need anymore, and improve our savings rate despite our lower income compared to some years ago. It actually guides you in structuring the budget - enter your net income at the top, then expenses one by one in categories. First time around, you’ll be guessing some things, then you track expenses and get more and more precise with time. We have it on both our phones and have not looked back.
Do you have also the App? I tried to download it but Google Play decided that it’s not available in Switzerland…
Any workarround for that?
Oh, yes, of course. We only use the app, never the browser version. I remember now, we signed in with another email address and indicated a US address, then downloaded the app to both phones from the US Store.
On the apps topic - I am using the one called Money Manager.
Simple interface, nice charts/breakdowns, full of functionality if you want it.
I used to stick with Toshl for quite a while a couple of years ago, but missing the recurring expenses feature now (only available with the full paid version).