Pension - Early or Defer?

[PhilMongoose]

@Cortana

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.

For AHV/Pillar 2 pension, would you prefer to withdraw this early and have a reduced pension, or defer it and get a bigger pension? What are the pros and cons?

[Burningstone]

Just as a sidenote, afaik you can only defer pillar 2 if you are still working and your pension fund must allow it, that’s up to the pension fund whether they allow it or not.

[PhilMongoose]

2nd pillar: Vested benefits (+/- 5 years)

Vested benefits can be drawn at the earliest five years before and at the latest five years after reaching the regular retirement age. Exceptions are the standard early withdrawal options, such as the purchase of a residential property. In the case of postponement beyond the normal retirement age, there is no* condition for the continuation of employment.

*In this regard, an important change is expected as of 1.1.2024.

On Finpension they tease that there is some important change as of 1.1.24 - but I don’t understand what this change is. Anyone know?

[PhilMongoose]

@Burningstone

Just as a sidenote, afaik you can only defer pillar 2 if you are still working and your pension fund must allow it, that’s up to the pension fund whether they allow it or not.

That’s what I thought initially, then seeing the quote in the OP made me wonder.

[0xLambda]

@PhilMongoose

On Finpension they tease that there is some important change as of 1.1.24 - but I don’t understand what this change is. Anyone know?

With the revised AHV law, it will no longer be possible to postpone beyond the normal retirement age if you are no longer working (except for 2024 - 2029, where they still allow it, but probably not relevant for most people here). It is explained here under “Freizügigkeit”: AHV-Reform: Das sollten alle zukünftigen Pensionierten wissen | VZ Vermögenszentrum

[PhilMongoose]

So with the lump sum flexibility reduced, let’s focus on just the AHV part:

Do you take this earlier or later? Aside from gambling on longevity (which we cannot really predict) I would see:

• Need: you need the money earlier so take it earlier. Or don’t need it so defer it for the future
• AHV: if you take it early, you have to also pay AHV (and taxes) on it.

anything else?

[Compounding]

@oslasho

my personal base case is to take it as late as possible, as i’d want max longevity protection

OR, you take it and create your own little pension fund I guess you’re familiar with the whole FIRE research, starting with the Trinity study?

[TeaGhost]

AHV gives you a COLA Adjusted Pension, which is worth quite a bit. Deferring AHV gives you a compounding increase in AHV of 5.2% per annum. Given the COLA Adjustment, this a real increase.

The alternative to deferring AHV by one year and getting a higher AHV is that you take AHV now and invest that one year of AHV income for you to generate Investment returns you can use in subsequent years. Even when factoring in 20% of tax, the 5.2% increase in AHV is beyond a Safe Withdrawal Rate you could use on the additional investments you could make by taking AHV at 65. Therefore: unless you speculate on early deat (who cares in such situation), its wise to defer AHV. Widow benefits to my understanding don‘t benefit from deferred AHV, just that you are aware of that…

[patrik]

FYI, here the official rules with some examples (Flexible Retirement): https://www.ahv-iv.ch/p/3.04.e

[Compounding]

Congrats, how did you make your fortune ?