Mandatory Expenses once FIREd

OP is back!
I have finally reached my 25k CHF x 25 = 625k CHF!!!
yeeeeh party time!
I, of course, will retire tomorrow :rofl: :rofl:

EDIT: I have then noticed my first post cited 28k, so no party :sob: :sob: :stuck_out_tongue_closed_eyes:
anyway my survival costs (rent, food, insurances, gym) are 23k, so I think I reached the lean FIREd status?


What about taxes? Teeth? Unexpected costs?

It’s more a mental milestone than a real one :slight_smile:
of course I will continue working, accumulating and investing, but it is great to think a big chunk of my expenses is covered forever. At least it will give me confidence in the next future to try part-time work, or even change to a funnier job (barista FIRE style)

and I really can’t get when you ask about teeth and unexpected costs, I can’t imagine anything so dramatic


I came up with the formula for the AHV once retired. Assuming you have at least 1.8 million in taxable assets. 3’763 CHF + (Taxable assets - 1.8 million CHF) x 0.00318.

So for example with 2.5 million it’s 5’989 CHF per year.

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I don‘t understand the formula, would be easier in algebra. 🥸

Taxable assets / wealth = x
AHV contributions once retired: 0.00318x - 1961

2nd pillar ‘Freizügigkeitskonto’ products, such as offered by VIAC or ValuePension, might become sufficiently attractive by the time I could get to RE that parking part of assets there would be net-positive. Maybe the lower performance would be offset by the lower wealth tax, AHV contribution based on wealth & the ‘Kapitalauszahlungssteuer’ still working for me.

Scenario 1): 2nd pillar capital * lower VIAC performance - (lower wealth tax + lower AHV contribution)
Scenario 2): (2nd pillar capital - ‘Kapitalauszahlungssteuer’) * better VT@IB performance - (higher wealth tax + higher AHV contribution)
Scenario 1) might win over scenario 2) with all things considered, it depends on how much is lost on relative performance differences due to TER / fees / % invested.

It might also be interesting to rerun the numbers on voluntary 2nd purchase: Move money into 2nd pillar ~2-3 years prior RE, moving it to e.g. VIAC at RE, cash out when required / 65 years old / at least 3 years post RE to not void tax benefits of voluntary purchase.

Something to check on would also need to be if:
a) you can get access to 2nd pillar funds when you need it without a huge hassle. This will take probably some planning, and emigration or setting up a business just to get funds out will come with a cost as well. Note also time limits in case of self-employment, apparently needs to be within 12 months.
b) you can get around the ‘Kapitalauszahlungssteuer’ entirely. Seems that you can claim it back if you become resident in a country with double-tax treaty and declare it there. Depending on that country’s tax regime it might swing favour into cashing out early.

In my case, with the current savings rate (~40%) & family situation (wife not working, 1 kid) I will reach FI around 55 years old… At that time it seems doable to keep a good chunk of assets in a good 2nd pillar product to bridge until 65. Then again maybe we can still do something on that savings rate… :thinking:

You could even keep it there till 70, still avoiding taxes on dividends and wealth.

True, regular pay out can be from earliest 60 to latest 70 years old for men, 59 to 69 for women. How likely that is still true when we get there is a different story though.

Apparently Pensionfunds can also split & pay out cash into 2 different ‘Freizügigkeitskonto’, which can then be cashed in individually. Still, if that makes sense stands or falls with the relative performance of ‘Freizügigkeitskonto’ vs. e.g. simply having VT at IB.

Let’s assume we live in canton Zürich. Let’s assume we stop working at 50 and cash out our pension fund of 500k into 2 seperate vested benefits accounts (for example ValuePension and Viac). Now lets calculate if it makes more sense to cash it out at 60 and invest it at IBKR or leave it there till 70. Factors that we need to consider:


  • Higher TER with VP/Viac
  • Capital gains taxed with VP/Viac in the end


  • No wealth and income taxes with VP/Viac
  • Less AHV contributions

Did I forget something?

We could add to the Pros that the starting capital is pre-tax and therefore generates a larger return for a given percentage of market performance. Once cashed out you will benefit from a lower TER, but on a lower post-tax capital. An additional Con would be that vested benefit accounts require some cash position (VIAC 3%, VP 1%?).

A note on the split into 2 separate accounts: Even though this works for 3a accounts, for 2nd pillar vested benefits accounts they seem try to remove any tax benefits from the split. At least they stated that as aim in this 2014 paper (german, page 4/5, second last paragraph).

What about asset allocation? What makes sense at that age? When I‘ll be FI it‘ll be about 80% stocks and 20% bonds (2nd pillar only), so I wouldn‘t invest that additional 20% anyways…

As I understand you will only be able to claim back the WHT if you pay higher taxes in the destination country

Where did you read that?

That probably refers to this:

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Referring to WHT on 2nd pillar withdrawal when leaving CH. I understand you first pay the WHT in CH at a rate depending on the canton where your 2nd pillar fund is domiciled. If the DTA with the destination country says such withdrawal is taxable in the destination country you can claim back the WHT from CH. To do this I understand you need to demonstrate that you have declared the withdrawal in the destination country.

When I made the statement above but I was assuming the tax in the destination country is almost always going to be higher than the super low Swiss WHT. Perhaps I am over simplifying and there are some countries with lower rates? In addition I realised am not sure if it is a requirement to demonstrate that you declared the withdrawal in destination country or just to prove you are resident

There was some discussion in this thread

Usually pension lump sum have a favorable treatment (iirc for France it’s like 8%), and some countries also may not tax foreign income. So it’s not a given that the Swiss WHT is higher :slight_smile:

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You are right it is not a given. I stopped looking further as I have a family and am limited in the countries I could realistically move to

The WHT rate In CH is lower, than 8%, especially if the pension fund is in Schwyz

If you move to UK the DTA says the withdrawal is only taxable in CH so no tax to pay in UK. But in this case the DTA means you can’t reclaim Swiss WHT had an overview on countries with DTA, and if tax on 2nd & 3rd pillar can be claimed back. If their information is correct (I have personally no idea), in Canada you cannot, in US you can, in Mexico you can claim it back on 2nd pillar but not from 3rd pillar.

If it is covered by a DTA, it essentially allows transfer of money to the destination and pay tax there without having to pay tax in the origin country as well, respectively the ability of claiming tax back from the origin country once proof is given that the destination country is aware of the money’s arrival. If then more or less tax is paid in the destination country is a different matter altogether and not a concern of the origin country anymore.

The question now would therefore be which countries have a DTA with Switzerland, if the DTA covers 2nd and/or 3rd pillar, and if that country then has a lower tax on it. There is talk in some expat forums that 2nd pillar tax was successfully claimed back after emigrating to Thailand, and no tax had to be paid according to the Thai tax code. The CH-Thailand DTA does not cover 3a however. Here is a link to a Swiss lawyer based in Thailand that could advise on this.

I personally do not plan on this, because a) who knows if this is still possible by the time I get to FIRE, b) financial planning that actually needs this to work would be imprudent and c) it is a lot of hassle with my family situation to just get around some tax money. At best it would be a welcome windfall if it / something like it would work out, but I’m not planning for it. If you are single and close to FIRE however, this might well finance 1-2 years of living expenses in Thailand if that is your thing and you have significant 2nd pillar capital.


There is an official list of DTAs and discussion in the thread in link above

In general you will have to pay tax on 2 & 3 pillar withdrawal in either CH or the destination country. Usually it is « bad news » if the DTA with your destination country says that the Swiss WHT can be reclaimed because it implies the payout is taxable in the destination country. The rate will almost always be higher than the Swiss WHT and in some cases higher than the tax you saved when initially paying in. This is rarely made clear when salespeople tell you that you can withdraw 2&3 pillar if you leave the country

Sounds like Thailand may be an exception