Take up self employment which qualifies for withdrawal of the funds (within 1 year)
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Or leave Switzerland for a couple of months, somewhere sunny and warm 
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I also have money outside the VB. You should always have liquid funds. I plan to put about 40% of NW into Pillar 2/3.
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Markets are hitting all time highs…all the time. You would literally do do this most years then.
That’s just market timing.
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I’d do it using two mental portfolios:
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“permanent” income once AHV is gotten as a matter of target wealth (which is residual taxable wealth + 2nd pillar withdrawal) x SWR.
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income provided by a portfolio that can be depeleted from actual retirement to the start of AHV inputs: refer to the Trinity study’s data or do your own calculations to see what safe withdrawal rate would seem sustainable over that period (probably more than 4% if less than 30 years, probably less if more).
In order to sustainably retire early, I need:
a) the wealth to cover my expenses after “normal” retirement age minus my projected 2nd pillar by then (i.e. the residual wealth from above).
b) the wealth needed to bridge from early retirement to “normal” retirement age.
a)+b) is the wealth that I need.
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If you get 30k/year in AHV, that translates to 750k in additional wealth (assuming 4%). If you retire at 50 and need to wait 15 years for it, you need to discount that with 1.04^15, so the residual value at retirement is 417k.
I would count 2nd/3rd pillar just as normal assets because they are going to be available in 10 years. It‘s very likely that a signifcant part of your wealth will be in your taxable account anyway when retiring so young.
So lets assume you have 2 million in assets including 2nd/3rd pillar (roughly 500k in total). Adding the residual value of AHV, you get to 2.4 million and start withdrawing 96k/year (6.4% of the taxable account for the first 10 years). It‘s 4.8% of your total net worth and 3.3% incl. AHV as income (thus 66k withdrawal at that point).
What do you guys think about such an approach?
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I quite like this retirement calculator from Financial Mentor, which allows you to factor in lump sum payments (such as 2nd and 3rd pillars / cashing out of Vested Benefit accounts) as well as AHV income
Quite easy to play with the different parameters to see where you land
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The logic in my view works, but with one clarification. Withdrawing 96k for 15 years, and this from 1.5M to begin with… that gives you a fairly low risk tolerance. I would ensure that you both:
- can early, and partially withdraw 3a / 2nd Pillar
- use a relatively low equity ratio on your free investments (all shares to 2nd/3rd pillar)
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If you aim for 70/30 stocks/bonds overall, you could invest 2nd/3rd pillar fully into stocks and your taxable account 900k in stocks and 600k in bonds. And you‘ll start withdrawing the retirement assets at 60, so you only need to cover 10 years. I think that should work.
The problem with converting it into an asset is that is it more of a guaranteed income stream and you lose the intrinsic quality of that guarantee.
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Good concept just my withdrawal rate would be lower.
I have an aversion to the concept of running down my pot and watching it decrease from a young age
I am happier with a less expensive lifestyle and the knowledge (=freedom) that I could afford to spend more if I wanted to, than actually having the more expensive lifestyle. I guess I fit the definition of a scrooge
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Or if you view it as interest on a low-risk long term Swiss goverment bond with a yield of 0.5%, it translates to 6’000k in additional wealth - although accounting for the fact that you’ll never get the principal back, it will be closer to 4’255k assuming 2.5% inflation.
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Not really. Some vested benefits foundations contractually require you to show proof of tax residence in another country before releasing your benefits, but Swiss law only requires them to ensure that you have given up tax residence in Switzerland (e.g. deregistered with the stated aim of moving to a different country).
The taxman is largely irrelevant in the case of withholding tax for early withdrawal due to emmigration.
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Obviously AHV is obligatory, regardless of how one views it. That said, the opportunity cost of contributing to the AHV vs. investing the same money in the SMI is enormous, if historical data is anything to go by.
Withholding tax does apply to early withdrawals for emigration, but it is handled by the vested benefits foundation. You deal with the Swiss tax office if/when you reclaim the Swiss withholding tax in keeping with DTAs (when applicable).
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If you want to factor an AHV pension into your FIRE plan, you may find the AHV calculator helpful, even though results are just estimates:
https://www.ahv-iv.ch/en/Leaflets-forms/Online-pension-estimate-ESCAL
You need to be registered somewhere, because it goes through the tax authorities.
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You need to prove tax residency in a country that has a double-taxation agreement with Switzerland that allows you to reclaim the Swiss withholding tax.
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Do you know how to account for the years till 65 after retiring? I mean with 2M in assets you pay 4k/year into it, the same amount that would be paid in with a 40k yearly salary. Does this count just as a full year with no income or are 40k added?
You need to pay withdrawl tax (lumpsum) as well. So it should be taken into account.
It could be that it’s still advantageous to buy into pension fund but just wanted to point out that there is a taxation involved with those assets at time of withdrawal
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