General Financial Planning

Life Hacking
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Wasn’t quite sure where to post this, ideally under a category like “(General) Financial Planning”, as it seems somewhat overlapping with but still mostly orthogonal to most if not all the existing categories (or maybe I missed some)? If there is already a suitable category, please move it there?

I’m curious if anyone else is doing this kind of planning at this level of detail, and if so, if they’re willing to share their approach(es). I’m of course willing to share mine, if anyone is interested.
My suspicion — drawing general conclusions from my own experience — is that you only start doing this once you’re close to FIRE or have FIREd.

Anyway, before digging into the details, some summary graphs sketching out scenarios up to my statistically expected expiry date covering taxable and non-taxable wealth accounts as well as expected cash flows.

  • Here’s my somewhat* worst assumption — asset appreciation just 1% and no dividend growth from my current base of 4.3%:

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    Seems my wife and I will pass on to greener pastures with a bunch of money left.

  • My better case scenario allows for capital appreciation of 2% (and still no increase in the dividend payout ratio):

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    Well, dang! Looks like the person with this plan is … maybe still a little too ascetic?

The planning** takes into account on a yearly basis everything and the kitchen sink (at least in my simplistic view, YMMV), i.e. her income and mine, federal and Staats- und Gemeinde- taxes (with progression built-in), AHV payed out and payed in depending when you retire and on your wealth and married-couple specific work situations (for having to pay in), retirement accounts, general and rent inflation, asset growth, asset return growth, staggered capital withdrawal with appropriate progressive taxes, etc.

This is what the Income / Expenses tab on that spreadsheet looks like:

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And then the wealth tracking tab:

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There’s also a couple of helper lookup tables to calculate the federal income tax, the Zurich Staats- und Gemeindesteuern including the wealth tax, the AHV Nichterwerbstätige tax for any years this would be due, as well as an “Assumptions” tab for, well, assumptions that I make, like the capital appreciation, etc (in order to quickly change all tabs/numbers instead of updating each tab individually), and finally a “Final figures” tab to state the actual numbers stated by the authorities up to the current tax year which will then overwrite the calculated number up to that completed tax year.

For completeness:

  • my entire initial motivation for building these spreadsheets was to understand and get comfortable myself with the numbers initially calculated by an independent financial advisor
  • my nowadays motivation to keep the numbers up to date is when I sense one of my plans might change, i.e. when I am considering leaving my employment, and I’d just like to run the numbers to see how things will work out if I remain unemployed (spoiler: fine).
    Running the numbers gives me peace, it reassures me that my general plan will likely work out cash flow wise — which I kind of already know, but it’s still reassuring to punch it into the (spreadsheet) calculator and see the numbers change a bit but in general work out just fine
  • my initial implementation of my own Google Sheet merely mimicked the professional’s financial planning spreadsheet**** which in subsequent iterations of mine I refined, mainly to find my own errors in understanding things correctly, and to suit it to my specific needs to calculate things.

Oh, all numbers provided in the screenshots above are purely fictional, of course.
A … ahem, friend provided those.

* WWIII could always Trump things, but then neither my spreadsheets nor anyone’s plannings probably won’t matter that much …

** My original spreadsheet also contained another half dozen options with partial capital withdrawal, pure pension and everything in between. Based on my current plans I’m focussing on full capital withdrawal and I am updating the spreadsheet with employment income as it takes place or is planned.

*** The planning is based on a template I constructed myself after getting & paying for professional financial planning by a independent advisor.

**** Generated by TaxWare, a professional software solution that (among other things) allows financial advisors to do financial planning for their clients in all Swiss tax jurisdictions.

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I haven’t done this myself*, but my (a few years after normal retirement age) parents have with their fiduciary financial advisor.

I read the whole annual report recently and was surprised/impressed to see that the financial plan included models/plans for various scenarios that would have a substantial impact of income or expenses. e.g.: what happens if

  • one partner requires substantially increased care in later life, for 3/5/10+ years
  • one partner dies much earlier than expected
  • the parents decide to move to be closer to the children

as well as the usual

  • stock market crash / sequence of returns risk

Maybe you just didn’t share those things publicly because it inevitably is very personal, but I think a general financial plan like that should also be intimately related to your personal goals and circumstances.

I agree it’s probably something you think about more as you get closer to retirement, which for me is still very far away (at least in my head :smile:)

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Thanks for sharing, very interesting insight.

My planning is more focused on mid- and long-term development of expenses (mainly kids, health care, interest rates), as well as the short- to mid-term income side with scenarios such as reducing work-time even more. Which would obviously reduce income and career prospects, as well as the timing of pillar 2 buy-ins, which are part of my asset allocation and tax planning.

Maybe, this includes different stages in life, like time horizon, family situation, or income compared to your friend. Alas, no Google salaries in my family, but it’s honest work. :wink:

I do have an understanding how taxes and AHV/IV contributions would look like in FIRE for one of us or both, but haven’t mapped it out year by year. Rather, as scenarios a, b, and c.
Same for the development of assets, it’s limited to scenarios with an average return of, say, 3, 5 or 7% per year.

Overall, the objective, besides the fun of it, is to understand how much is needed to not have to care anymore, and then some :smiley: But I guess over the years, I will switch to, or rather add an analysis like yours, e.g. to time withdrawals and verify the assumptions.

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I have setup my own excel sheets for financial planning to figure out a few things, and recognize surprisingly many things from your approach. I did it specifically to:

(a) Figure out my strategy regarding pension funds, which led me to conclude to aggressively buy into my second pillar (and plan ahead on how and when to withdraw);
(b) Get transparency on some specific costs post FIREing, especially AHV and taxes, from which I realized that the hike in both once I will withdraw my second pillar again is not insignificant;
(c) Compare retirement scenarios in two different cantons (and one foreign county), which defined my (yet unsuccessful) search and parameters for real estate;
(d) Model various FIRE cases, both in terms of returns and cost of living, from which I ultimately defined my FIRE level.

Especially the last point was a great exercise, as it gave me the confidence to trust in all of this. Now everything (including investment strategy) is defined, I am simply coasting through it, and nearing my FI date.

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I use a comparable Excel model since some time and it is helping me very much, having achieved FIRE, but still doing some consulting & advisory work .
It uses the following structure (Excel Worksheets):

  1. Portfolio/Investments: This manages all the investments structured by asset classes and investment principles I am following. This also includes pension fund.
    Nearly all figures are automatically updated using MS Stock Data.
    It also defines the targets I do want to achieve, such as financial means required until 60, 60 to 65, and afterwards.
    For each investment principle there are some checks ensuring that I am actually implementing them (e.g. asset mix, actual vs. targets).

  2. Income: This is an overview on an annual basis of the income I am currently creating with my consulting & advisory services.

  3. Expenses: This is an overview on an annual basis of the planed (budget) and actual expenses I do have. Expenses are structured along what is variable and what is fix (such as taxes, insurances, communication). The figures are on a monthly cumulative basis what allows me to again get a very good understanding if there are major deviations. As most of the expenses are either fix or paid by credit card (Certo One) it takes very little effort to keep this up-to-date)
    Here I also track that all the expenses are optimised (e.g. insurances) and do flag what needs to me worked on.

  4. Withdrawal Strategy: I am using the Endowment Strategy to calculate the withdrawal possible what gives me a good ongoing understanding howmuch we can spend. It also calculates what return I do need to fund my current expense level (what is below of what we spend). This is very reassuring and helps to sleep well at night.

  5. Liquidity Management: As I want to ensure that my investment rate is as high as possible I do forecast the liquidity needs on a monthly basis for one year.

  6. Wealth Development: This tracks the quarterly development of our wealth level. This is linked to the portfolio sheet, but needs to manually be copied on a quarterly basis. Again, giving a lot of reassurance about how things are progressing.

  7. Tax Optimisation: This helps me to optimise taxes, for example by optimising the pension fund/3A withdrawal, when turning 65.

  8. Major Savings: This is a list where I track what savings I realised, for example insurances, communication, and so on. Motivating when additing up how much savings you can realise while still getting the same benefits.

This is probably a general comment. I am mainly focussing on optimising the cost base and investments, and less on having a frugal lifestyle.

Hope this helps.

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I used my private access to Chat GPT 5 beta 1 to make a corresponding Venn diagram:

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Amazing what AI is capable of these days!

(sorry for derailing myself the thread I started myself … :partying_face:)

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Does Bard (edit: sorry, Gemini - I can follow AI but marketing moves quicker than my eye can see) provide the same answer? Chat GPT might be politically motivated to make builders of other AI models look bad… :stuck_out_tongue_winking_eye:

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These are the columns going across my sheet (rows are years):

  • Year
  • Age
  • Age of youngest
  • Nominal return
  • MV RE net equity
  • Net Worth
  • Pillar 3a
  • PF1 PF2
  • AHV realized
  • Brokerage #1
  • Brokerage #2
  • Liquid assets
  • Capital gains
  • Amortization
  • Mortgage interest
  • Monthly + AHV
  • Wealth tax
  • Capital withdrw tax
  • Std pension con
  • Extra Pension contribution
  • Income tax
  • Investment income
  • Other income less costs
  • Total PF capacity
  • Total income
  • Less monthly dede
  • Taxable Income
  • Gemeinde tax
  • Total tax
  • Tax rate
  • Tax% plus wealth
  • ETR income
  • ETR total
  • Net RE wealth
  • RE value uplift for AHV
  • % or return as income
  • outflow p.a. excl. pension
  • Monthly outflow
  • Montly inflow
  • Monthly net flow
  • Gains on Pillar 2/3
  • Monthly net flow incl pension
  • Monthly delta NW
  • Mortgage debt
  • Monthly Costs excl. mortgage, taxes, AHV
  • Inflation adj.
  • Other income
  • AHV
  • Income AHV
  • Income subj.AHV
  • UI contrib
  • Extra UI
  • AHV income
  • UK Pension
  • Investment property income
  • Salary
  • Child allowance
  • Stock Vesting
  • Total Pers risk
  • Old Pension #1
  • Old Pension #2
  • Federal Tax (kids)
  • Canton/Gem. Tax (kids)
  • Federal Tax (no kids)
  • Canton/Gem. Tax (no kids)
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The FI part is all clear, the RE not yet, meaning
(a) Asset allocation in RE phase. I have clear guardrails but need final review and conclusion;
(b) Bond investments of that final asset allocation. Same story, decent understanding but needs final conclusion;
(c) How do to withdrawals, practically speaking. I liked reading recently about Finpensions new offering that allows automatic defined monthly withdrawals, didn’t see that offered in CH before.

No answer needed today, but also will need to figure it out in the not too distant future.

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Just overheard the neighbors talking about sport, read the news and tested it myself. Well, you get what you pay for :sweat_smile:

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I’m “others”, and not quite there, but it’s expenses. I personally doubt fine-tuned asset allocation will make a big difference in the long run, as long as it’s more or less diversified.

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Time and tracking helps. My spend fluctuates per year, but after having reached many years of tracking I am comfortable in my understanding of my expenses, including all the things you only buy every few years. The unknown is future inflation, but that can be modeled. This of course assumes your are comfortable with your current lifestyle. If you are not, figuring that out would be first priority.

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Not yet immediately thinking about retirement and hence not yet in the state of mind you are. Hence, please take my view with some grain of salt - as I just don‘t yet experience how imminent retirement feels. But my view is that such exercise is counterproductive.

In my view, you need to achieve two things:

  1. Know whether you can afford to retire
  2. Have a simplistic, Age and Mental Detoriation Proof mean of periodically checking if you were still on track

The complicated Excel will probably just pseudo factualize what you already know when reviewing your financials for 5 minutes. In your case, it re-confirms you were good to go - in other other cases it re-confirms what a Financial Adviser after reviewing the Tax Declaration, Pension Statement and 3rd Pillar thinks - like if it was going to get tight.

Once you (rightfully or not) jump into retirement, you will anyways need to de-complexify things over a few years (dissolve Pillars, Get a Pension/Annuity). Once you managed this (probably multi-year) transition - things become relatively simple: how much do you earn (pensions), how much do you spend, what liquid assets do you have. Unless you realise you would run out of money in the next ~ 20 years aka by 80-85 (not assuming asset growth); you just keep your lifestyle at the same level. If you realise you run short of money, you review whether you can cut expenses and if not just keep going and make it to a Problem of your 85 year old me. Don‘t do trackers you simply can’t maintain as you age.

Once you are 80+, you can in my view (unless you completely overdo and burn your wealth in 10-15 years only and run into excessive wealth burndown bucket woth social security)… you can simply take a more latin approach and say. Don‘t ask me how but I trust it will work out. If you from 65 slowly but linearly burn down your wealth in 20+ years and then realise you only have AHV and Pension left once 85… trust me there will be a solution and you won‘t eat catfood. Clearly, this assumes you keep AHV and Pension and stay in Switzerland/Europe. It further assumes your spouse was of similar age. If you don‘t have a pension - well then you shall probably just put lets say 500k aside that you keep until 75 and then convert into a Leibrente/SPIA. Will be the worst financial invest you ever make but still the best thing to do (as its 100% age and mental health proof).

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Today’s answer:

“Nothing?”
“At least – somewhat surprisingly – nothing related directly with my plan.”*

Last weekend’s answer (after me wrangling with myself about quitting my current job, now likely putting in my notice):

“Do these plans really hold up? Let’s check the numbers again.”

The-previous-time-when-I-checked-the-numbers answer (end of 2023, regular numbers update):

“Nothing?”

Longer version for those who like watching paint dry (modulo the occasional drama of a fly landing on the not yet dry but sticky paint and reaching its final destiny right there, to the dismay of both the fly and the painter):

Anyway, so, I just went through updating my numbers last week, shrinking the planning models from many** to one. The remaining one is full Kapitalbezug.

The trigger for me updating and checking the spreadsheet again was me arriving at the conclusion to probably leave my current job and putting in my notice this month (was even conflicted to put in the notice on Friday, per end of May).

This kind of decision/thinking always causes anxiety in me, I can’t help myself. I rerun the numbers, and the numbers confirm what I already knew, see also @TeaGhost 's recent post in this thread.
It’s just psychology and my own way of dealing with it.

* If you squeeze a little harder: I am the only one understanding and knowing how to execute on this plan. Lightning strikes on me, the plan stops. There is not sufficient knowledge (or interest) on how to execute on these money stashes sitting around, producing cash flow, eventually flowing in, taxes, etc etc.
I think I just caught myself on convincing myself on drawing up a will?

** Mix these options until your head spins (or Google Sheets complains about too many cells …):

  • Kapitalbezug
    • only him fully
    • both fully
    • half Kapitalbezug, half Rente (sub-mix further for him doing half Kapitalbezug, she doing full Rente
  • both full Rente

Surprisingly these options all look about the same if you squint a bit. The both full Rente one tends to do worst as expected, as it won’t benefit from the compounding of the nest egg but remains a percentage payed out on your Alterskapital. But even the Rente one would work until I ride out into the sunset, mentally smoking a Marlboro produced by one of my holdings.

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:100:

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This is an important realization. Instead of re-running the figures over and over again. Can you re-direct your focus towards your anxiety? Like talking to your financial advisors, starting with you know that you can call it a day - but are afraid of doing so.

I don‘t know what the drivers behind it may be but I think (no first hand experience) that you are provably driven by the need of letting go control (your financial destiny will largely be in the hands of Mr Market), not knowing how to know you remain on a solid track 10 years down the line, and probably as well some „guilt“ lf beeing less career focused.

Generally, I think that this calls for good conversations (friends, financial advisor) a very simplistic and age/partial dementia proof plan of ensuring you stay on a solid track (compare 3 figures every year; annuity at age X, exposure to countries/cultures that embrace „letting go and trusting that tbings work out ok“ like travelking latam and sitting exposing yourself to a different lifestyle… and fundamentally: identifying what ourpose/mission/passion you retire to. You don‘t retire from, you want to retire to something.

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Btw, when worried about financials in age. Always take rente until the extent you can survive… and capital to offset inflation and for discretionary spending. Rente gives ease of mind…

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Thats not a big risk as such. If you happen to die, your spouse and/or kids will both be comfortable enough to ask, and be provided opportunities, to get help with the financials. There will be a sister, uncle, … that tells her to talk to VZ or a financial advisor. You don‘t have any secret Sauce a financial advisor doesnt have - so they will get somewhat decent advise. Maybe only benefiting 95% from the financial potential but that is good enough.

Your real risk is if you either become financially illiteral / develop dementia or even worse not even realise you degress. In such situations, its less likely that someone pushes your spouse in the right direction and she just doesnt look at things until its too late.

Clearly, a will is never wrong but beyond this, I think You mainly need two things: a simple, written plan and instructions to your spouse (what to do, when, why; who to ask in case of questions) plus a simple starting point for her to pick things up. Simple Bank setup, approachable (Bank, not IB) manageable number of assets… or better a set and forget annuity / rente. 100 different shares with brokers she can’t talk to will freeze her and increase the threshold until she decides to break with the past investments from the (now demented yourself) and she will ket things run longer - plus they can turn worse more in the meantime. Keep it simple.

You will leave money on the table - thats normal. Fire is a journey where you first learn to not leave money on the table - and in later stages of live consciously still do it but this time for a reason (dementia resilience and simplicity for the heirs).

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Yeah. I have this problem too - I’ve always been a belt and braces guy and the events of Covid sort of re-inforced that viewpoint.

I used to laugh thinking “how can somebody with $10m worry about retirement?” when now my ‘number’ increases with time and now I feel ‘$8m would put me at ease’ whereas in reality a tiny fraction of that would be perfectly fine.

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Fair enough.

Although I have to say this does sound a little bit like the finance industry that profits from the “hey, it’s just a 1% fee” approach and who then profits from these returns relentlessly.

Then also it’s always easier to have an armchair conversation about this than facing a real situation … aka here we are now, Goofy’s dead, what are we going to do now.
In theory, your sketched plan plays out fine probabistically, but in practice, things are … well, often somewhat different?
Maybe more clearly: I don’t care about the probabilistic outcome for such situations, I care about my own specific case.*

As for sourcing our friends and family for the right advice, I would push back a little bit: I don’t know of anyone in our social circles who would advise the way you sketch it out, but maybe that’s specific to us. I have never so far encountered anyone in the social encounters with friends and family who would even mention let alone recommend professional financial advisors.
Going through the list of friends and relatives, the most likely advice would be to sell it all and buy Swiss real estate or “go to a bank” to get advice.

The thing is, in general, people are really financially illerate.

To your point about optimizing returns: perhaps getting a 90% return instead of a 100% return is fine – it’s just a 10% difference --, but to me this is outrageous. It compounds even more outrageously over time.

Maybe I misunderstood your remark.

* Off tangent: Homo Faber by Max Frisch is the book that initially theoretically taught me this lesson (in case you’re into Swiss literature). It took me many more practical lessons to internalize it for myself.

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90% of return is generall good enough. Lets think about it the other way around. What would you do if you knew you died in a year? How would you set up your finances so that your spouse would understand and just leave things as-is? And then, think about how much money you leave on the table with this approach - forget the compounding but focus on if the final returns and assets were still good enough? If so - you just documented your 65+ asset allocation/strategy.

What was my response to this (i am not in that situation so this is theoretic). Probably a combination of:

  • Annuity that lasts my death (aka on both names or 50/50 on the name of the spouse and on mine)
  • A simple (management, taxes, …), easy to use (admin, contact, …) and failsave (no interventions, no risk of change) Investment plan like an Avadis pay-out plan so maybe a 60/40 fund where they every year distribute 4% of the original amount
  • A resilient fee only financial advisor for check-ups, that will be around even in 10 years like VZ

So what would I do in your shoes (and once I all capital transition from 2nd/3rd Pillar was complete (aka age 65+)

  • Invest 1.5M into a Two-Beneficiary Annuity that yields probably about 50k p.a. => together with AHV this yields 85k and secured survival
  • invest 2M in an Avadis 60/40 with automatic, monthly withdrawal of 40k per Month => together with Annuity and AHV this yields 125k and secures a good live
  • Invest the remaining 1.5M in VWRL held at a Swiss Bank / Swissquote => 2% Dividends from this push you to 155k p.a. plus Inflation Adjustment aka a very good life; 4% Withdrawal from this gives you 185k p.a. And you can live on spendipants

Clearly, this plan is highly inefficient but it is effective and death proof.

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