How its going and way forward

Hello forum

I am already reading along since a bit of time. I am female, 36 years, lawyer (100% salary a bit over 200k), living in the biggest city in Switzerland. I have one kid (I work part-time now). I live in a 3.5 room apartment (CHF 2’000) with my partner and kid which is luckily very cheap and also has a garden. I can save around CHF 65k a year.
Many of my friends are Swiss and you know how hard it is to discuss money topics. This is even more difficult being a girl, as many of my friends are not interested in investing. So I thought I share my story here and get our wisdom on what a good way forward in terms of investing would be for me.

Asset allocation (total 1m):

Degiro (CHF 160k): 41k iShares Core SPI ETF, 5k UBS ETF - SXI Real Estate, 112K V FTSE ALL-World UCITS ETF USD Dis
IBKR (CHF 50k): Swiss Stocks (NESN, KNIN etc., VUSA, RGLDS)
Cash (CHF 250k)
Time deposit (CHF 350k): at 1% and 1.8%
3a (60k): which is 60% invested
Pension (120k)
Crypto (10k)

In the future, we might buy a house from my family. Its more a sentimental thing than a financial decision and it will be expensive (approx. 1.3m and renovation for around 700k). However, this is far from sure.

If possible I would like to semi-retire early (probably around 50-55) and work part time (40-50%) from then on. Therefore, my investment strategy should be geared toward this goal.

What are your thoughts?

Thank you.

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Hi Elenya,

Sounds like a very solid financial situation to me, congrats! :muscle:
Depending on when (next X years?) and whether you would buy the house together with your partner (is combined salary > 300k?) it looks like you are well prepared with the money you currently have in time deposit + 3a to be used as “Eigenmittel” in addition to a mortgage (if you take the pension as well its even less tight).

Personally, I would put more into world exposure rather than Switzerland only (given that your pension, and maybe 3a, are also Swiss focused). But that’s more personal taste. :slight_smile:
Once you semi-retire you could put more weight on CH again to increase home-bias.

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First of all, very good financial situation at your age. Maybe your girl friends should talk to you more often about money matters :slight_smile: they could only benefit

Even though you can get a lot of good ideas here, I would really recommend to have a discussion with financial advisor. Please find one who is not working on commission basis but only on „advise only“ basis. I believe they are called Fiduciary but since you are a lawyer, you would know better. As I see the key thing to look at is the asset allocation and this can be useful money spent one time.

Some ideas from my side

  • can see that your asset allocation is more heavy on Cash, Fixed income & pension. It’s understandable. But this might be an area to look into. To see if you are able to increase your equity allocation and if it matches your risk tolerance. However please think about it very carefully as this is very individual for everyone.
  • In addition, if we just look at your equity portion , you are quite exposed to Swiss stocks. Approx 45% of your equity is linked to Switzerland. Perhaps something to consider to reduce to 25-30% and diversify internationally
  • Individual stocks -: not sure why you have individual stocks in IBKR, unless you are good in stock picking, I think you should try to use broad market index funds

P.S -: I see you are using VWRL. Now you have more UCITS ETfs to choose from on top of VWRL. Read more here

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First impression:

  • A lot of cash not earning much
  • Pension very low considering salary. Contributing more each year could reduce taxes and reduce idle cash balances. Potential to withdraw a few years down the line to buy a house
  • $1m at 36 with a kid is good going.
  • You still have 20 years to invest 65k a year. You’ll need a decent return on that investment if you want to be able to fully retire in your given timeframe
  • However, since you want to only partially retire, it should be doable.
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Your numbers look solid. I wonder, though, why with relatively high salary, low rent and a shared household you save “only” 65k a year? On the other hand, 1m in assets look quite high, given your savings and asset strategy.
Is that a combination of high expenses, or due to working part-time and saving or investing more previously?

I’m sometime surprised to read how differently couples handle their finances. In my bubble, people don’t really talk about it, either, but seems like most handle them jointly (as do I).

How did you arrange, and if it’s separately, account for part-time work or child-care?
How does he (I guess) factor in the house purchase, given that it’d be a family transaction?

The questions above are partly out of curiosity, but also should factor in your future strategy. In general, as others said, sounds like a lot of cash, but quite little in the pension fund. Nothing wrong with that, if the cash part is due to risk appetite or possible house purchase. Same goes for the mix of Swiss stocks, real estate, crypto.

However, have you considered adding to your pension fund? To me, that still qualifies as safe, brings stable returns, lots of tax savings and is still available for home purchase.

Part-time retirement is definitely doable, either way. You could even do it now, given that your 40-50% salary would be +/- an average salary in the biggest city Switzerland :wink: Depending on your expenses, you don’t need to touch your assets and could likely still add a little.

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If that is your goal make a rough spending budget for 19 years’ in the future aged 55. From there most of the answers will fall out including whether or not you can afford to buy the house.

Regards your current allocation you have ~25% of your wealth in equities which is very low if your goal is 20 years in the future.

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Thank you already for your kind advice and comments.

Salary: combined around 300k. Mine went from 140k to over 200k over the last years.
Pension fund: I know. Its bad. Its a good plan for the “higher earners” in the firm though, thats why the company sticks with it. I thought about buy ins, but every time someone tries to explain me again how this PK thing works in detail I do not understand. It is a black box for me. I will buy in when I am closer to retirement probably.
Expenses: I am not particularly frugal :wink: and with a part-time job my earnings went down. Some years its more savings than 65k (around 75-80k).
Shared Finances: My partner (a he) and me are very open about each others earnings/wealth however, everyone does its own finances. We have a shared account for household and our kid but the rest is separate. As I a work part-time and he does not (yet) he pays one KITA day himself and the other one is split.
Swiss Stock/Stock Picking: You are right. My plan is to diversify more with worldwide ETFs but it takes a bit of time as I invest every month. Stock picking was more out of sympathy for the companies, hahah. I know, not a very rational decision.
Possible house purchase: If this is an option, it will be in around 2 years. Regarding the participation of my partner in the property, I am not quit sure yet. Probably with a loan with profit sharing but this is tbd.

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As others have already suggested I would consult a unabhängiger Finanzberater – they charge as crazy as lawyers (pun intended), but you’ll get solid advice.

I’d really recommend educating yourself about this (or have that independent advisor explain it to you in detail – they will even run calculations on how much tax you’ll save and compare that to returns you’ll have to make if you instead invest in a taxable account to just break even).

In your income bracket the progressive tax is already starting to pick up considerably – I would base your decision based on your marginal tax rate versus your age (even though you are right in general: with your investment horizon of 30 years you will likely have better returns than with that money in pillar 2 plus the taxes saved).

The only real drawback that I see for you in buying in is that this money in pillar 2 is not available for you for producing additional cash flow that you consume or for withdraw from when you plan to semi-retire in 20 years.
With your current plan of still having income by working part time, I find this a less important criterium, though.

Personally, I find this pretty fine, actually, as taxes already eat up a significant portion of your income, at least of yours (not clear whether you’re married, in which case it’ll be even worse …).

If you’re not married, probably about 50-60k of your salary goes to income tax (for your partner it’s significantly less), and you’re left with maybe 140-160k or so of disposable income after taxes? Substract your savings and you live on 80-95k. Comfortably, as you point out.

It’s a dial you can adjust as you see fit.

I would clarify the exact legal status between you and your partner and how this is interpreted by the law in the case where – let’s hope not! – you go separate ways. Are there significant gemeinsame Errungenschaften for the time you’ve been together and built up wealth (and hopefully plan to continue so at least for the next 20 years)? If so, maybe the planning separately financially makes less sense?

Anyhow, I’m not a lawyer™.

Consult a fellow lawyer unless divorce affairs are your specialty and my whole entire sub-comment just became completely useless … :wink: ?

I’m a stock picker, please take my advice: don’t stock pick out of sympathy for the companies. Just go with low fee ETFs.

Seriously.

That 2 million commitment (IIUC) is a serious curveball thrown into this entire equation especially if it happens in about 2 years.

I mean, probably no big issue for you to get it financed, but it’ll bind a fair bit – at least 260k – of your assets and will have an effect on your partly FIRE plans in 20 years. Maybe positively, maybe not. Definitely consult with someone knowledgable if you’re not in a position to run the numbers yourself.

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You are a lawyer. You don’t need it explaining to you. Just get a copy of the pension fund regulations and read it. You’ll have a document that looks like this:

A lawyer should feel right at home reading through that stuff.

Once you read through it, you’ll be in a better position to ask questions to help fill in gaps in understanding. Then you just need to read up on the financial/tax aspects or have someone talk you through it. The pension documents typically have illustrated examples with numbers to help explain.

I’m curious, actually.

My perception of a lawyer – not that I know any (luckily, sorry @Elenya01 ) – is that they will advise (mostly) on a point-in-time question, not a "well, let’s plan this decision out over the next 20 years, taking into account historical market returns and tax savings today discounted over the same time period … anyway, as stated, really curious.

I am mainly a tax lawyer and do a bit of private clients . And usually yes, we advise on a point-in-time question taking into account the current situation and probably the next 2 years (if possible) but I usually work with big corporations, not individuals.

Regarding your inputs/questions:

Marital status: not married
Pension: My main concern is not the tax part (e.g. deduction, taxation when withdrawn) of the pension fund, it is more how their investment works, what their overhead is, is my money safe their, the return is possibly better elsewhere. Interest is 1.25%. Furthermore, my buy-in gap is “only” 73k so, not that big.
Taxes: My taxes were around 40k a year now with part-time (80%) they are around 32k.

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This. Standard financing conditions would require 400k downpayment (half of which could come from the pension) and a 300k salary for a 1.6M mortgage. With a salary lower than 300k, a bigger downpayment may be required.

If the time horizon is roughly 2 years, that money should be in low duration assets not exposed to market risk, which is what you have (cash+time deposits, assuming the time deposits will mature in time for it) but that’s a significant drag on your investing capability, especially if you don’t intend to sell the house later (as it has sentimental value) and as such, don’t get benefits that can be used for FIRE from the capital appreciation.

I’d try to assess whether I want to go through with it (you can afford it but it may conflict with the partial retirement goal) and potentially talk with my family to see if an internal financing solution can be found (as it has sentimental value and they probably value it staying in the family).

Not easy decisions but you’re well equiped to deal with them. Congrats on your path so far and welcome!

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Taxes and gap capacity are very low, so maybe it isn’t relevant at all.

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Thanks everyone for commenting. Much appreciated. Part of the deal for the house would be a pre-inheritance, so no real cash outflow in parts, however, it is still a big investment to consider.