Is it fine to fill up 3A every January or do I need to spread it out?


#1

Hi guys

Is it fine if I put the maximum amount in my VIAC every January or is it better if I do half now half in the middle of the year? I heard there is one month where the markets usually drop signifcantly (December I think) due to a certain habit… What was that about?

Thanks!


#2

You can transfer every month the same amount of money – so you would be investing every month into the stock market. ( Dollar-Cost Averaging)


#3

Some finance sites will advise you to do a one time payment of the max amount beginning of the year. But this advise if only true If the money would otherwise be sitting on a Savings Account with 0.025% interest - yes than you are better of putting everything into a 3a account at the beginning of the year because you get higher interest on the 3a account.(~0.3%)

But when investing in the stock market, like you do, via Viac than you best spread out the in-payments over the whole year. For 2019 I will do 12x CHF 568 and 1x CHF 10 to achieve the max of 6826 for people with a Pensionskasse. Viac is only rebalancing at the beginning of the month so doesn’t make sense to split it up more.


#4

My advice would be different from the two above. Assuming that you’re a typical mustachian who invests on the stock market (like in VTI or VT or whatever), probably every month or quarter you’re putting the maximum possible savings into the stock market. So there is no free cash lying around. If so, then you should invest into pillar 3a as late as possible, for example putting your whole december savings into it. This way your money stays invested on the open market for the longest period of time. The assumption is that 3a potentially yields lower returns than whatever you normally invest, which of course can only appear true after many many years.


#5

Very interesting idea :+1:


#6

If your normal investment performs better than 3a this is definitely correct. But the difference might only be marginal. The most significant factors are:

  • Higher TER in Viac 0.53% vs 0.25% VWRL vs. 0.10% VT
  • There is no income tax on dividends in 3a, but there is in your normal investment
  • You will be slightly taxed on capital gains in 3a
  • Dividend Tax Leakage in Viac/VWRL

For some people the dividend tax savings might outperform the higher TER, especially when comparing against VWRL.


#7

No difference tax-wise, just market timing

When you hear such things as a layman, you’re already too late. Market’s too competitive these days, such simple anomalies get quickly exploited into the ground.

IIRC this particular one was not true already in the 90s


#8

Agree with Bojack. Max out the 3A as late as possible and instead throw all into VT in IB that has a TER of 0.1% vs 0.5% of VIAC


#9

It’s not as simple as comparing the TER of Viac and VT. Not having to pay taxes on dividends is huge. I just did some quick calculations on what having to pay taxes on your dividends in terms of TER means.

Assuming an investment of 6826 and a dividend yield of 2.5% (CHF 170) the following tax savings will apply for Viac when comparing to investments outside of 3a:

If you have 100k taxable income: (No church tax)
Freienbach (SZ): CHF 23 -> -TER 0.34%
Zürich (ZH)): CHF 33 -> -TER 0.48%
Les Verrières (NE): 44 -> -TER 0.65%

If you have 200k taxable income: (with church tax)
Freienbach (SZ): CHF 36 -> -TER 0.53%
Zürich (ZH)): CHF 56 -> -TER 0.82%
Les Verrières (NE): 62 -> -TER 0.81%

If you want to compare to VT than of you also have to take higher Kapitalzahlungssteuern into account that applies in 3a. Which will vary depending on where you live at the time when you will take out the money of your 3a and how much more capital will be in your 3a because you invested during the year and not just at the end of the year. Assuming you take out 25k at once in SZ this will be less than 1% of your additional capital gain more, in ZH and NE more like 3% more.

When comparing to VT than the dividend tax leakage on US Equities also has to be taken into account. Assuming a 35% allocation in S&P 500 in Viac and the same Dividend yield of 2.5% will result into a higher TER of 0.13% and a loss of a rounded up CHF 9.

Assuming I made the calculations correctly you can see that for some high income people in high taxes locations Viac might actually be more attractive. But for most people you are right and VT is better. VWRL is a different story. And if being close to the total market and not overweight in Switzerland is the most important thing to you than VT/VWRL are to be preferred anyway.


#10

We know this, but what youre missing is that it doesnt matter when you invest into 3a, you always get the same benefit. So you might as well invest in the latest possible moment. Were not saying it isnt worth it to invest in 3a.


#11

You missed my point. I didn’t take the tax saving you get from investing into 3a into account only the dividend tax you are saving by not waiting until the end of the year. What I’m trying to tell you is that in some circumstances it’s not true that investing into 3a at the latest possible moment is the best thing to do because Viac might actually have lower cost than VT/VWRL because you are not paying dividend tax on this investment in that year.


#12

Oh I see! I did not consider that dividend is tax free in 3a. So do I understand correctly, that it depends on one’s income and domicile, and the differences are anyway not big, so it practically doesn’t matter when you invest in 3a?


#13

Can you elaborate on this?

Are you referring to the Kapitalsuzahlungssteuer?

VIAC themselves imply this only counts for swiss equities… Can anyone shed some light?
see here: To 3rd pillar or not to 3rd pillar

Well in my opinion it doesn’t. All you accomplish by paying into 3a at the end of the year is “delaying” the fees for one year. Let’s say you want to invest into 3a until 2049. Thats another 20 years. The first year you pay ~0fees because you invest on 29. Dec. After that you pay fees for 19 years. Compare that to investing on January 3rd, there you pay the fees for 20 years. By investing in December you save yourself 0.53% of 6768 > ~36CHF over 20 years


#15

Yes regarding the tax on capital gains in 3a I’m referring to the Kapitalauszahlungssteuer.

Regarding dividend tax in 3a: You will not at all get taxed by the swiss authorities. Outside of 3a you have to declare dividends as income wether they are from swiss etf/stocks or out of country. What you will lose is the withholding tax (this problem is called dividend tax leakage). In VIAC/VWRL this is 15% on US equitues that you will lose. Thanks to double tax treaty between US and CH you can get those 15% back with your tax declaration if you are holding US equities with a US domiciled product. Eg. VT. Not possible to get those back with with non US domiciled ETF.

In most cases VT will be slightly better. But the dividend tax saving and higher TER will be balancing each other out to some degree, we are talking about CHF 0-20 total. My conclusion: Do what you prefer either will be fine.


#17

Thanks guys! I jusr put it all in now to have it checked off the todo list and for it to grow. Bless VIAC and let’s hope for even lower TERs :wink: