Don’t you want a bit of a safety margin? (I have relatives who lived over 100 years…)
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If you look at Bogleheads, they are even postponing their SS to 70 to increase their fixed income! Just to have a safety margin if you end up living longer than expected.
Note that this calculation is NOT saying that you will run out of money in the 30th year. 43% of combinations will get you to 0 somewhere within 30 year option. it’s ~30% if you reduce the span to 20 years.
With average life expectancy at 84 now, it’s no brainer to take the annuity. Exactly why pension funds are at risk as they promise more than it generates. I would also consider your potential mental and physical capacity at 80 to manage portfolio in IBKR 
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That is a very bold statement. We have been discussing this for a while now, so clearly it’s NOT a no-brainer! 
In my opinion, when you’re old and retired, you should set yourself a threshold like: I will spend as much as allowed, as long as the probability of me running out of money before I die is under 1%. Then, using historical stock market returns and Monte Carlo simulations, you can see at which point you’re still safe. And each year, if that risk exceeds 1%, you can reduce your spending. And I think if you follow this plan, then it’s a no-brainer to take the lump sum
Sure, it’s a very good point about mental health. Both my grandparents were in bad mental state already in their 70s. But for that case maybe I will devise a contingency plan like in the movie Still Alice. She was a professor who got Alzheimers at a very young age and she recorded a video for herself with instructions to overdose on pills when she can no longer remember the names of her children. Of course (spoiler alert), she spilled the pills and failed to euthanize herself. 
Fair comment. But again, having significant asset allocation to stocks for your living expenses at age 70-80 is too much risk. Even now we say do not invest funds you might likely need in next 2-5 years. If things go wrong then what? You cannot dramatically cut cost with likely health expenses - or get a job.
Having a guaranteed steady income with all the potential health expenses over weighs the risk. Of course each case is individual, perhaps some have expectancy to live until 70-75 for whatever reason then lump-sum wins. But if you expect to benefit +20 years only from this income I would take the guaranteed 6.8% withdrawal rate.
All of this old age thinking at 30s is interesting. I guess we all have time to figure this out in the next 20 years
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Easy to say that you’ll take the lump sum when you are in your 20/30s. I think your risk tolerance will decrease dramatically over the decades.
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There is still the 1. pillar. Plus, yeah, 100% into stocks at age 60+ might be too risky. But you could buy a house/flat using 2. pillar money, which would save you a huge fixed cost (rent), but allowing you to keep the principal, which then you could pass on to your kids.
So what are you saying, should our crucial life decisions be made out of fear, by our monkey brain? Or should we try to take all risks into account while we’re young and come up with a sound advice?
Btw if you plan to leave inheritance to your kids, it never makes sense to ease the 100% allocation in stocks, because if you have a big family, then the kids will take care of you, should the things go VERY wrong, and if they go very right, they will inherit a large sum. That’s the advantage of having a family instead of staying single.
Correct. But you get bread from the rents.
I want to revive this thread.
I’m tracking my pension fund too because I’m able to download a monthly statement. But how (and if at all) would you track the return of the pension fund? Right now I’m totally ignoring my employers contribution and the interest I get, I’m just tracking the total amount.
If you’re speaking of 2. pillar, then you don’t care about the fund’s return. They decide what your return will be: 1% or maybe 1.5%. If they have a good year, then their coverage of their future obligations goes up.
So you would just track the total amount including interest? And only track the performance of what you really invested in the market?
I made some calculations. If I look at my total net worth, 80% of it is invested in stocks. And this won’t change due to 2nd pillar contributions (I treat my pension fund as bonds). So I’ll stay roughly at 80/20. Nobody is truely invested 100% in stocks.
I track it in beancount. I track not only my own private account, but also my “account” at my employer and at my pension fund. I book the transfer from the employer to the 2nd pillar basically as a transfer between two of my accounts. Then at the end of each year, I get a summary from the 2nd pillar: how much did I pay in, how big did the capital grow, what were other costs, and I book them all as expenses. I don’t really track performance as a percentage return, but I keep track of the balance and of the income/expenses that arise from having a 2nd pillar.
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I’m doing it like Bojack (except in a spreadsheet). I’m getting the following data from my pension fund:
Employer:
Savings contributions
Additional savings contributions (due to our specific plan)
Risk coverage premium
Administrative fees
Same for the employee side of things.
I’m counting both my and my employer’s savings contribution as income (classified as savings on the expense side of things), I count the rest as mandatory deductions between my gross and net salary.
If I wanted to estimate the returns on my pension fund, I’d take the saved amount at two different dates, deduct my employer’s and my contributions (because I consider my employer’s contributions as part of my salary), allocate administrative fees in a prorata way between the savings and risk coverage categories and count the savings’ administrative fees against the returns.
I’m counting that as bonds but part of it is actually real estate and a really tiny portion is stocks.
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I use PortfolioPerformance, it’s an open source tool.
I created different views, based on the “availability” of money. So I can have the tool include or exclude the 2nd and 3rd pillars.
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I count 3a to Networth as I will be able to easily withdraw it to pay back the 2nd mortgage (which will just reduce the liabilities of the same amount of assets). But I do not account/count on the 2nd pillar as I don’t expect to have access to it at the time of retirement (somewhere between 45-50).
I don’t see it. It’s like a very long term time deposit. And you can withdraw it if you leave Switzerland or buy a home. You can’t have it at the age of 50, but you can at the age of 60. If you don’t track it then one day, at the age of 60, poof, you’re suddenly 100k richer (probably much more).
I think that’s better than accounting for it at the 6% which might go down to 3-4% by the time we retire.
Just count it as an asset that will vest/mature when you’re 60.
I wouldn’t withdraw it with 60. Better to keep it invested without taxes as long as possible. If you stop working at 50, I would invest it with ValuePension or Viac. Even if it’s not part of your available assets for another 20 years, it’s still there. 2 million in IBKR and 1 million in 2nd/3rd pillar still gives you a “SWR” of 120k/year, even if you just use IBKR at the beginning.
That’s my plan anyway. Withdraw 3a with 61/62/63/64/65 and 2nd pillar with 69/70. Most people on Bogleheads postpone SS (AHV) till 70 to get more. It’s a plan B if you live way longer than expected, to make sure your portfolio lasts even 50 years. But I’ll decide that once I’m >60.
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So you’d count it as bonds (safe asset, low, guaranteed yields) and part of your net worth that would become invested with early retirement in a vested benefit account (ValuePension, Viac or similar) ?
I’ve actually been pondering it too and went with two metrics: net worth and actionable worth (net worth minus 2nd pillar, 3rd pillar and primary home when I’ll have one (that one counts toward lowering my costs).
Your way to see it makes sense (that your 2nd pillar becomes available as investable asset if you early retire or launch your own venture). I could see myself implementing it as using my net worth as my main metric and considering 2nd pillar as bonds, 3rd pillar as whatever assets it’s invested in and primary home as real estate generating an income of its eigenvermiet annual value (while that value would be added to my expenses).
Thanks for the insight!
ETA: to make my reasoning more clear: I’ve been stuck with the thought that if I count my primary house in my net worth (that I use to evaluate if I’ve reached my FIRE number) and calibrate my retirement expenses without a rent (which I use to calculate my FIRE number) because I own a house in which I live, then the house gets counted twice. If I have to sell it to get an income out of it, then my expenses go up and I would not have planned for that. Since my plan was to use my 2nd and 3rd pillar to finance the house, they went in the same basket.
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