Currently I’m working 80% besides studying, however, I’m considering stuying full time for the next semester.
I have read a bit conflicting information about 3a contributions. As far as I understood, for this year I can deposit the full amount of 7056, because I was employed at the beginning of the year. Is that the case?
Rule of thumb: The younger you are and the less you earn, the less 3a contributions make sense compared to long-term private investing. Of course, this might different if you plan to use 3a for house downpayment, or if you’re leaving the country soon.
Don’t believe financial industry marketing of 3a. Also don’t believe financial influencers, who often receive kickbacks for promoting 3a. Make your own calculation. Don’t just look at taxes saved, look at the higher 3a-fees compounding with time, and consider you need to pay tax on your 3a account when withdrawing (basically being taxed for your stock market returns).
Market return: 7%/year (of which 2% are dividends)
Time horizon: 30 years
IBKR TER: 0%
Viac TER: 0.50%
Marginal tax rate: 25%
Withdrawal tax rate: 8%
Yearly max contribution: CHF 7‘000
As dividends are taxed outside of your 3rd pillar, the expected return after costs/taxes will be identical (6.5%). Meaning: 7k/year for 30 years with 6.5% return gets you to 646k.
A) You don‘t use the 3rd pillar and only use IBKR, you‘ll get to 646k.
B) You use the 3rd pillar and save CHF 1‘750 per year in taxes which you can additionally invest in IBKR. Gives you an additional 161k after 30 years. Wihdrawing 646k from the 3rd pillar will cost you 52k in taxes. So you‘re still better off by ~100k.
Right now you are probably not earning much to pay significant taxes. So, 3a contribution won’t result in significant tax savings. Note that it seems that soon it will be possible to contribute into 3a for past years. In this case, I think it makes sense to not contribute now and contribute later when you earn more (but before you have children ).
Furthermore, focusing on your studies, learning your trade and funding a well-paid job will have much more significant impact on your wealth than anything discussed here.
Depends also on your financial situation. That money will be locked away until retirement with some exceptions.
You probably need some money for next year (and the years after), you might want to travel a bit after your studies and so on.
If you think you have enough money aside and some money left, then you could invest it somewhere (3a, broker, etc).
People here are sometimes too focused on financial optimization and forget the life context around it;)
The requirement for using the pillar 3a contribution is that you earn a OASI-eligible income in that tax year. So if you earn a salary of more than 2300 francs (or 0 francs if you’re a domestic worker, or artist) in a calendar year, you can make the pillar 3a contribution. If you’re self-employed, the contribution cannot be higher than 20 percent of the income earned.