More 2 pillar or Private Investment?

Share your story
#1

Hello everybody, this is the first time I post into this forum so quick introduction: I started my FIRE journey just this year and I am a “young” (below 30) investor with my wife and no kids. I have been living in Switzerland for 4 years for reference.

So I recently dig into my second pillar situation as I never went into the full extent of how that works exactly before.

After doing so I discovered that after almost 4 years of work in Switzerland I currently have 23k deposit in there and I requested what would be the max amount that I could deposit before going ahead and fully invest all my savings.

After checking I was told I could deposit another 13k max in there (I didn’t check for my wife yet, will keep you posted in case). Now Considering that I have Invested in ETFs already 5k which I will not touch for sure, I have another 20k ready to invest and I was wondering what would be the best pay off.

Could you guys please help me to break down this situation? How much will I save in taxes really by investing in 2nd pillar and really to what kind of investment return am I looking at in there as I can’t really control it like the 3rd.

Thanks

#2

In my case -> If I pay 20k in my 2nd pillar, I save 5k taxes.

#3
  • what’s your marginal tax rate?
  • what’s your risk profile?
  • did you already contribute to 3a?

I think given when you started to contribute, you probably don’t have any missing years? (I don’t remember what the cutoff was) So might definitely be worth waiting for when your marginal tax rate is higher.

#4

Well, I recommend to use this more for time based tax deferral strategy. So, when you expect a big income for one year which brings you to max marginal rate, use this to go to a lower rate. You dont need to put everything now there, as in time you will get higher income and will be more effective later. If you consider you will get in a future lower income (with a baby for example) you can buy into the 2nd pillar before, so you get the max amount of tax savings.

1 Like
#5

Has anyone an online calculator or something like that to see if it’s worth paying in?

#6
  • what’s your marginal tax rate?
  • what’s your risk profile?
  • did you already contribute to 3a?

You are right I forget to mention that important information:

  1. I am not so sure yet as up until 2019 I was paying the tax at source, only starting this year I will have a declaration together with my wife (Swiss). However, on my final statment after 3rd pillar i paid about 15%. My wife has a low income as she works only 50% so i am expecting we will pay less taxes together but we will see.

  2. I invest so far only in VT and I am considering to buy into non-us ETF and Swiss ETF too, but I am still planning my portfolio, but overall only ETF anyway and 70-80% will be VT

  3. Yes we both have 3rd pillar, 3 year buy in.

In short, so far we have about 80k in savings where 40k is in 3rd pillar, 13k we keep cash and 27 should go in investment.

to answer also @arheom : i was actually thinking this year as i got a huge bonus for a project and it might shift our taxation a bit