I don’t think so. AHV is capped to 85’320, everything above should not count towards it. Try to play a little bit with the AHV calculator, you should see that missing contribution years cannot be compensated increasing the yearly salary.
You aren’t missing any years if you keep paying the minimum amount.
If there’s any potential oldish fathers who may be “looking after their child/children/teenagers” in FIRE, they give you an Erziehungsgutschrift for the time a child is under 16 or even over if studying. The Erziehungsgutschrift is a kind of like a fictional income 42k p.a. for your AHV in those years. 10 years of that is 420k. If the wife is not working either then you split that.
You will miss years if you start contributing later than 20 (which was not your assumption - I agree - but it’s my case for instance).
Anyway what I was pointing out is that imo you cannot reach 3.754 Mio earlier than 65 because your contributions are capped to the maximum. AHV is for social security, for higher salaries 2nd/3rd pillars kick in.
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Just to point out one important distinction again (which I believe is what you are pointing out @weirded):
- If you want the full 2’370 CHF/month pension, you currently need 44 full years of contribution and an average income of 85’320 CHF/year. You can generate that income in earlier years of your life and then stop working, but you need to continue to contribute, for example based on your wealth or through “Erziehungsgutschriften” or your partner.
- If you miss a year (or month for that matter) and end up short of 44 full years, there is absolutely no way to get the full 2’370 CHF/month. You might have earned millions during insured years, but the two step calculation will still first arrive at 2’370 CHF/month and then shorten it to X/44 where X is the years you contributed.
To be very precise regarding @Cortana example: Income of “Jugendjahre” is only considered if you have missing years. If you already have 44 years and only would want to have that income added, you are out of luck.
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That is not quite true. Someone with a taxable net worth of 2 million must pay 4254 chf per year. This results in a virtual income of 4254 / 10.25% = 41’500 chf.
Read on page 28-33:
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@1742 I think we are in line on the principles.
I had only a quick look at the linked document. If I understand it correctly, you mean that you need to start working on day 1 and then accumulate enough wealth so that - when you stop working - the contribution you continue to pay (based on your wealth only; for sake of simplicity we leave income from wealth away) equals the one you would pay while working with the max. insured salary (10.25% employer + employee you would have to cover fully -> 85’320 * 10.25% which roughly corresponds to a Vermögen of 3.45 Mio at page 31) ?
Your contributions aren’t capped at 85k. You can compensate your early years (usually with a very low income) with a much higher income in your later years.
Just make sure that you didn’t miss out any years.
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I originally ignored income credits from wealth based contributions. With this, “simply” earn 3.75 Million CHF before you stop working and you are all set.
But you are correct, you could add the virtual income from wealth based contributions in this calculation, and therefore stop working at age 50 with 2 Million CHF assets, having contributed “only” 3.13 Million CHF and get the remaining 0.62 Million CHF from those contributions over the next fifteen years.
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Yes, you are right. You pay the percentage on the full salary, this way you can “average” the max contribution based on different salaries (lower or higher than 85k) in different years.
You’re talking about contributions. The 4702 I mentioned is not a contribution. It’s the minimal yearly salary added to your total income sum if you have no income. I had it for a few years when I was a student. Also listed in the AHV extract.
https://www.akow.ch/produkte/ahv/beitragspflicht/nichterwerbstaetige/
But someone with 2 million in taxable net worth will pay 4250 chf per year that counts as 41500 chf income for the final rent calculation.
The 480 or so chf are for when you have less than 300’000 in taxable net worth and it counts as 4700 chf of income.
Personally, I wouldn’t recommend classifying politically-vulnerable insurance schemes (aka AHV/ALV) as assets. Politically-controlled insurance schemes like AHV may diversify your portfolio, but they can change at any time. It is important to note that the AHV is a social insurance scheme and not a fund. As I see it, I have to participate whether I like it or not. IF I actually get that pension, it will be a nice extra, but I certainly don’t count on it. I simply can’t accurately predict what may happen politically and economically in the next 30 years.
The exception is, of course, if you are from a country which does not have a social security agreement with Switzerland, in which case you can cash out your AHV benefits early as a lump sum by making a quick move to your homeland.
Occupational pension funds are a different matter, because it is relatively easy to cash out your benefits. Personally, I count occupational pension fund benefits as assets.
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Heyall,
i am sorry not to have the time to dig into it right now, but i was always convinced that the AHV rent is solely based on the number of years that you contribute.
when you dont work, a yearly payment of 440 CHF makes the year count towards your pension (that’s what expats should always do when they come to switzerland for the previous 5 years). The income-dependent rent is a thing of billar 2, no? am i utterly wrong here?
No it’s not. AHV is a combination of years and avg. salary.
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As @Cortana correctly says, AHV is a combination of years and average salary.
If you have paid the minimum AHV amount for a total of 44 years until your retirement at 64/65, then you are eligible for a full pension. “Full” in this sense means that you get between the minimum and the maximum pension, depending on your average salary over those 44 years. If your average gross salary was 85’320 CHF (per year, i.e. a total of ca 3,7 Mio CHF over all the 44 years), then you get the maximum pension of 2370 CHF/month. With a lower average income, the pension gets less, as well, until there is a minimal amount of 1185 CHF/month.
So if you have at least 44 years of contribution, your AHV will be somewhere between 1185 and 2370 CHF per month.
If you have less than 43 years of contribution, your pension will be cut by 2.3% for every year missing.
This is, of course, the state of the current year. The further away you are from 65, the less I would take the exact numbers in your calculations. But I can promise you that AHV will be around in 30 years. It might be like 30% less, but there definitely will be some pension, since a majority of the population is counting on it. The fire folks on reddit have the same discussion regarding Social Security in the US and most of them expect like 60-70 of today SS level as the minimum.
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We are talking about Switzerland. One of the most secure and most stable countries in the world.
I fully expect to get the AHV rent. The only question is how much.
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The AHV (as well as Pillar 2) faces the same problem as every social security system of developed countries: old Promises of governments that are usually unsustainably high, unfavourable demographic developments and the lack of political will to reform those systems (announcing pension cuts to the people = political suicide). The star of the swiss system is currently fading.
Imbalances in AHV you can always compensate by raising taxes (VAT). Imbalances in the property-driven Pillar 2 of currently ~25% (influx vs. payments) are becoming a very nasty thing to deal with 
Just looked into this pension stats by the *Melbourne Mercer Global Pension Index (MMGPI). Number one ranked are the Netherlands, where the pension age is being gradually pushed back by the Dutch government. They have a site, where you can type in your age and see when you are eligible for a pension. For me it would be 68…
- In 2015 the age of retirement was 65 years.
- In 2017 the age of retirement was 65 years and nine months.
- In 2018 the age of retirement is 66 years.
- In 2021 it will be raised to 67 years.
- From 2022 the age of retirement will be linked to life expectancy.
Maybe this is unstoppable process, but would love to see other alternatives than work until close to 70. Especially in an environment were you are technically “old” over 45 and face challenges in a hiring process. A friend of mine in Madrid was in an interview in a big Spanish Bank and they told him that they don’t hire employees over 45 of age for normal banking jobs. I do see similar activities here in Switzerland too.
Complete joke. You have to work till 65+ but will barely find a job after turning 50.
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