How to know ? Third pillar insurance > Kill or keep

Banks, Insurances & Third Pillar
1

Hi there,
Thank you in advance for your expert advice !

It’s okay, I’m ready.
After being fooled for 6 years with a 3rd pillar insurance at 6,800 CHF/year, I decided to switch to VIAC or Finpension!

Especially since I am already invested in the stock market on my side via ETFs

Subject A]
I have two options:

  1. close the 3rd pillar and suffer a loss between the payments and the surrender value.
    Then opening of 5 3rd pillars anywhere

2/ reduce the payments as much as possible and let this 3rd pillar run
Then opening of 4 3rd pillars anywhere

What are the data I have to compare to know which is the most interesting solution between both ?

Subject B] :slightly_smiling_face:
With my wife, we plan to become a cross-border worker (France or Germany), but only in a few years (40-50 years old, we are 30)

With this in mind, is it still relevant to go through another 3rd pillar system ?

Have a nice day,
Thank you again,
Kenny

1 Like
2

Just to share the pain for some encouragement. I made the same mistake early this year (yes, more painful because there have been plenty of posts warning about this). I just got out of the trap this month losing nearly 4,000fr of surrender value so… bite the bullet and move on. I suggest don’t reduce, just get out.

An example calculation from MP:

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3

Hi
Thank for your feedback and sorry for your losses !

Well my question is not about continue or stop investing 6800/y in this 3rd pilar, I am already convinced in stock markets. But :
A] Would it be better to

  • a. close, withdraw everything, big losses, and ciao
  • b. reduce prime amount at 100/y (or sth else), reduced losses on long term

B] What about this topic in the context we’ll probably will live in a border country in 10-20 years

4

Opportunity costs.

You have to determine the current (and/or future) surrender value and make an assumption for performance of your alternative VIAC/finpension portfolio.
We can’t advise you or answer that question without the figures.

(as a side note, being unable to easily determine the current surrender value for any well-diversified investment vehicle investment would be a huge red flag for me)

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5

unless a detailed calculation/ simulation (excel is your friend) tells otherewise, clearly cancel the life insurance, and transfer the money to the 3rd pillar robo advisor depot of your choice.

then open 4 more depots. contribute only to those until they reach the value of your first depot.

6

I ask my insurance 2 different things :

  • the current surrender value
  • police change if I stop pay their prime

I will post all of these data here

Have a nice evening !

1 Like
7

Hi everyone,
I finally ask my insurance to get all data to analyze it (cf lower)

Currently, two contracts :
1 - A surrend value from an old contract, from 2020 to 2056, without any payment additionnal per year
2 - A new contrat from 2020 to 2056, 6500 paid once a year, can be reduced to 100/y minimum

I analyse all possible options with these contracts :

image
image815×747 28.7 KB

“Perf.” ratio is Earnings(=capital-cotisations)/cotisations

Finally, the conclusion is quite obvious…

  • risk pays
  • Contrat 2 has to be reduced or stopped

What are your thoughts ?

Have a nice evening !

8

Basically, loss aversion, the endowment effect, and status quo bias drive this irrational escalation of commitment to the losing investment. Investors may even double down and buy more, colloquially described as “throwing good money after bad.” This is called the sunk cost fallacy, where people make irrational decisions to attempt to justify earlier decisions, instead of accepting that the bad decision is now a sunk cost that is likely unrecoverable.

Don’t stay emotionally attached to bad outcomes and dig yourself further in the hole. Assess the situation rationally, cut your losses, and move on.

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9

Thanks, great thoughts !
In other words, Stop 1+2 ? :wink:

1 Like