General Financial Planning

I’m not sure I understand your situation and your position. Having a few relatives (aunt and cousins) who have gone through grief recently, I would say one need they have had was to both be occupied (because it takes the mind away, so having administrative tasks to perform isn’t an absolute negative thing) but not to have to worry for their short term future (for the left-alone partner, i.e. having enough money readily accessible and enough understanding of what they can expect out of their future situation not to worry about it).

Regarding the financial situation, as the surviving partner (or the partner dealing with a partner who’s slowly loosing their mind) I would like to have someone to talk to about it. Professional advisors might be helpful, a trusted and knowledgeable friend would be too. As TeaGhost points out, dementia should be a real concern, for which I would want the people around me to be able to identify it and push back against me if I start taking detrimental financial (and other) decisions. That is, I would want:

  • my partner and children (if applicable) to understand my financial situation and financial plan.

  • to have one or more trusted friend(s) who understand my financial situation and my financial plan, are not afraid to give me frank feedback and to push back on me when I’m pushing forward bad ideas and know that I’d truly appreciate it if they took upon themselves to help my partner/spouse in case of hardship.

As the situation evolves, it’s possible that I become the trusted friend who has to be relied on and that my own friends become not available anymore, in which case, I’ll have to find another relative/friend to be willing and able to step in. Such friends are precious and I would try to do my best to make them feel appreciated and to be there for them when they themselves need it.

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one content-wise observation to your Excel. You plan in with material income taxes, even once retired and all pillars were dissolved. At this point in time, income tax was generally a matter of dividends you receive. The challenge is that it was extremely difficult to forecast that as it depends a projection how your assets evolve.

Proposals: How about you convert your thinking and view both PAST and FUTURE Asset Returns POST Income Tax. That has the benefit that your income tax figure will be something you can reasonably forecast. At the same time, you will notice that clearly return figures come down a bit; but not so much and things are still manageable.

At the Moment, I just take an arbitrary income tax burden that I think was faily static - and I apply it to both actual dividens I receive as well as future forecasted return. That takes investments returns completely outside of my income tax projections.

This might sound like a contradiction:

Good Transparency & Robust Plan: I have a comprehensive understanding of the financial situation we are in and a robust plan for the future. This all works just perfect as of today and the levers one can pull are impressive (especially don’t underestimate what difference of it makes if you can manage your pension fund versus what you get when being employed) . I sleep very well at night. This therefore sometimes just feels too good to be true.

Risk of Changing Fundamentals: That’s why I ask myself at the same time if there will be some fundamental changes that might impact the underlying assumptions. This is now a little bit of a political/philosophical statement. How can it be that I worked the last years night and day, paying massive taxes, social welfare, and pension-fund contributions and now working significantly less, there is net approximately the same I get as before. From a society perspective there seem to be too little incentives to work what will put the fundamentals at risk.
That’s keeping me awake at night.

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Maybe, but now you are consuming your wealth instead of growing it.

Huh, I have an exactly opposite impression: early retirement comes with loads of financial charges, not completely justified IMHO and you can’t deduct that many things since you are not working. Granted, I know how to be an employee and don’t know how to be an early retiree.

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In my case it is the combination that creates a favourable situation and our wealth is net growing as fast as it did before.

I still do some consulting work what allows me to make the deduction and reduce my taxes.
At the same time being self-employed/having my own company allows me to optimise my pension fund where I have a significant portion of my wealth.

And here comes the interesting part. Average net return of pensions funds in the last 10 years was 3.6% according to a study. However I only got between 1.0% and 1.5% on the compulsory part of the pension fund and between 0.25% and 0.5% on the rest where I worked before.

Now you can easily do the maths and understand why it can be very beneficial to have your own business and work significantly less.

In case that’s ZH and married, it looks like he used the marginal rates instead of the average?

With your estimate on dividends and AHV, you got your income. From the deductions, I guess only health insurance, wealth management and donations remain for a renter with no or grown-up kids.

yes something is wrong there. Just had a look at 2039:

  • AHV: 45k (no Pension?)
  • Wealth: 5.5M

But then:

  • Dividends: 235k (4% Percent???)
  • Income Tax: 98k (on 45k AHV and 235k Dividends)

To be honest, I think that this representation doesn’t make much sense as a dividend of 4% is fairly high and for sure not tax optimal. I would recommend to start tracking Investments post Income Tax on Dividends (just build an accrual for Income Tax whenever there was a distribution) and then essentially budget income tax vs. your non-investment income only.

I think the biggest challenge her is that the dividends are quite out of range vs. the wealth.

Well, 4% is plausibel with dividend heavy stock-picking. He does include capital withdrawal, so no pension received.
Not accounting for deductions (you could add some -15k), that’s 280k income, which results in a 35% marginal tax with a local rate of 100%.

In my tax table, that’d some 68k in taxes, not 98k, which happen to be 35% of 280k.
Let’s hear him, maybe it’s an intentional buffer. Or a coincident and a different tax location :sweat_smile:

This is actually something I don’t worry about at all.

See this picture of dividend and coupon income from my portfolio if I had bought it in 1999:

Note that this includes the early 2000s recession (dot-com bubble and September 11th attacks), the Great Financial recession (2007-2009) and the COVID-19 recession.

If anything, this reassures me that my dividend income stream is very steady and generally growing, even without me adding to my assets.

Asset prices fluctuate much more and I would agree that those are more difficult to forecast. Here’s the portfolio price over time if I had bought everything in 1999:

Much more volatile, also illustrates the sequence of returns risk if you have to sell assets to sustain yourself (and allows you to easily spot those recession periods mentioned above).


Yep, can’t think of any other streams in and out.


Yep, 4% is plausible, IMO. My current overall portfolio yield is 4.23%. My stockpicking portfolio yield is 4.3% (which means I’m currently underperforming US Treasuries from a pure yield perspective :smiling_face_with_tear:).

I actually expect my yield to go down over time and pure capital appreciation to instead go up (current assumption: 2% capital appreciation) and the two — capital appreciation and payed-out yield — combined in the 7% range or so which I feel is conservative.
Should I require more cash flow than expected, I can always tune my portfolio by picking some low yielding assets and turn them into higher leading ones.
This year I’ve already started doing this when e.g. moving out of Olin (a five bagger for me) and moving into something higher yielding.

To think things through with lower dividend yields:
If I assume just a 2% return (cash payed out) instead, my cat (who will eventually inherit everything) would still be fine, I think:

Thanks a lot for pointing this out, @TeaGhost and @Brndete! Seems my tax tables weren’t up to date.

I updated them, but the numbers didn’t change much — total tax for that year is expected to be 97k instead of 98k —, which is the best outcome for this kind of updating-things exercise: it gives me more confidence that things are mostly right even if I kick the tires of my spreadsheet.

After updating my tax tables I now arrive (for 2039) at 236k in passive income, slap on an AHV of 45k*, and total income is 281k.
Resulting total tax (taking into account taxable wealth of 5558k) is 97k (Staats- und Gemeindesteuern: 74k, Direkte Bundessteuer: 22k) according to my own calculations.**

If I use canton Zurich’s tax calculator I end up at 22.6k Direkte Bundessteuer and 75.5k Staats- und Gemeindesteuern (for the municipality of the city of Zurich).


* Probably underestimating given the recent popular vote to rob the young and pay more to the old farts.
** My spreadsheet’s tax calculations:

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Ok, that’s what confused me. In your first table, under Ausgaben you show both income tax (at 98) and wealth tax (12), to stick with the 2039 example. While the wealth tax is too low (do you not consider state and Gemeinde for it?), you double count that part.
You could double check in the tax calculator by running income, no wealth and vice versa seperately. Should be some 26k, well, as of today’s table.

Anyway, that won’t change your calculations.

I like the general concept and plan. While I did my collection of spreadsheets, it’s all separate, for stocks and pillar 2 development, income, expenses and saving, tax rates etc.
Your example shows it can be very helpful to a) combine all of this and b) eventually do a year by year layout, incl. for example pillar 2/3 withdrawals, continued AHV contributions and eventually AHV received. Few more years for me :wink:

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Yeah, apologies if this caused any headaches.

I believe I started with the independent financial advisor’s original spreadsheet, copying things left and right and adapted it to my own needs without always adapting the correct row name, etc.

Happy investing to you!

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Maybe a bit off-topic but here a different perspective on high-yield strategies:

https://earlyretirementnow.com/2019/02/13/yield-illusion-swr-series-part-29/

https://earlyretirementnow.com/2019/03/04/the-yield-illusion-follow-up-swr-series-part-30/

https://earlyretirementnow.com/2019/03/06/yield-delusion-swr-series-part-31/

Assuming a fixed yield of 4.3% (I assume inflation-adjusted?) plus additional asset appreciation by 1% does not sound very conservative, at least not when looking at longer historical data…

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With those numbers, I find this title fits you quite well @Your_Full_Name . And when I’m not picturing you as Goofy, I’ll picture you as this model on the pic from now on.

(shamelessly stolen from NZZ am Sunntig from June 2nd 2024. The newspaper article incidentally doesn’t give us forum members any info we aren’t aware of yet, so I won’t repeat any of it here)

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Honored to to have this as my alternative Goofy mugshot … that tan, though … :hot_face: *

BTW, I read the article, too, and felt about the same way as you about (not) seeing anything new in the article.


* @Your_Full_Name looks at his healthcare positions and checks whether any of them produce skin cancer treatment and are undervalued to contemplate whether to add to those positions.

Also, judging from this pic hair coloring seems to be a … ahem, fading trend?

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Sir, the markets seem to be up as we speak.

Pencil in the previously calculated eleven minutes but now and an additional 13 seconds for living comfortably.

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Thanks for providing those links. It’s always good to see a different perspective.

After reading up on those articles I’d say

  • I am simply not competing with other strategies like 60/40, the S&P 500 or even Vanguard’s high-dividend yield index fund VYM* – my custom strategy just needs to work for me and it needs to satisfy my cash flow needs which it does.**
  • Earlyretirementnow compares different indexing strategies (totally fine) – I’m doing stock picking. I don’t think these different approaches are easily comparable.

You’re right, conservative is the wrong word. I should have said “in-line”.

"With a long-term inflation rate of 3% over this period these are the historical real returns for each asset class since 1928:

  • Stocks +6.8%
  • Bonds +1.6%
  • Cash +0.3%"

Source: Historical Returns For Stocks, Bonds & Cash - A Wealth of Common Sense

Since inception in June 2019 my CAGR is 13% which I don’t expect to maintain. It doesn’t really matter anyhow since I am personally focused on steady and ideally growing payouts.


* I do have some overlap with VYM, but I don’t like it for various reasons, e.g.

  • VYM fully tracks the FTSE High Dividend Yield Index which focuses only on US high dividend yields. I do a mix of dividend growth companies and a few high yield ones with focus on the former, and I don’t exclude non US companies.
  • VYM invests only in large cap. I prefer a mix, ranging from micro cap to large cap.
  • VYM does yearly rebalancing only, I can do this opportunistically any time when I feel something in my portfolio is severly overvalued or undervalued.

** For the record, though, the TWR for my stock picking portfolio is in line with the performance of the S&P 500:

(which isn’t really all that surprising given my beta of .97 compared to the S&P 500)

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Someone asked me for a copy of the spreadsheet and I created an anonymized one here: Varianten Budget jährlich – June 2024 - Google Sheets

In order to make edits, you probably have to make a copy of the Sheet to your own account.

Here’s some light instructions if you’d like to use it as well:

  • Tabs ‘Einkommen / Ausgaben’ and ‘Vermögen’ are the main tabs for planning things out over the years ahead. They autoupdate automatically based on tabs …
    • ‘Tatsächlich’: actual numbers reached at the end of a given year or when the final taxes are determined. I punch in those numbers as they arrive or as I pay into pillar 3a etc.
    • ‘Annahmen’: numbers that I assume, i.e. returns on the different pillars (1, 2, 3a), Umwandlungssatz (I used to run calculations for receiving a Rente instead of having the capital paid out), etc.
  • Tabs marked as locked (you can of course override and edit) that are used as lookup tables to calculate the various taxes at state, cantonal and municipal level as well as to calculate how much to pay into AHV if / when I have to, etc.
  • a helper tab ‘Graphdaten Vermögen’ to make a nice graph of expected income and wealth over time.

Enjoy?

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