Invest to reduce the mortgage

with a view to reducing a mortgage that is renewed in 7 years, do you think it would be convenient to pay money into the 2nd pillar to have a minimum return and tax savings or would it be better to invest it with a mix of shares/bonds to obtain a higher return?

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If you are sure that you can withdraw money from the second pillar in 7 years, considering tax savings for the round trip (pay in - pay out), no investment strategy can beat it on the risk adjusted basis. You are guaranteed to get a tax deduction and to get back your initial amount plus 10 to 15% interest minus withdrawal tax on the whole amount.

However you should think if you want to use the 2nd pillar funds to repay your mortgage at all. Mortgage interest is tax deductible, and by repaying it with your 2nd pillar money, you increase your taxable wealth, which means you pay more taxes on your wealth. It might be better to repay it with your post-tax money: those which are not invested in stocks.

In any case, analyze your tax situation :grinning:.

I am currently toying with an idea to count mortgage repayment as a part of fixed income in the portfolio.

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my idea was to pay around 15k per year into the second pillar so that I have tax advantages and a minimum return and then evaluate in seven years when the mortgage is renewed whether based on the rates it would be better for me to lower it or leave it like this… do you think it’s a good idea or are there better strategies?

This is surely a reasonable step to do and won’t hurt you. To figure out what would be the “most optimal” way to proceed, you would need to get more information and run some calculations. For example, if you are already heavy on cash and 2nd pillar, it might be better to invest more in stocks, because (and this is basically what comes out from reading a lot about personal finance) long term investment returns are basically determined by how much stocks in the Portfolio you have.

So you can consider the following scenarios from the expected investment returns and tax prospective:

  1. No mortgage prepayment, money are invested post-tax as per your strategy
  2. No mortgage prepayment, money are invested into the 2nd pillar and post-tax as per your strategy
  3. Using post-tax money to repay the mortgage
  4. Using the 2nd pillar money to repay the mortgage

Then it also depends on the investment horizon. If you manage to do #4 in 4 years (no withdrawal block for the second pillar money), it would be an excellent return. In 20 years, #1 (depending on the % of stocks) should be the best one.