Saving and investing for retirment for a silver fox

Hi all, if you like me, have been told your whole life - in particular in school - that you’re more that stupid when it comes to numbers, figures, math. Well, then you are. In my case, it’s because of dyscalculia, so I sort of glaze over when it comes to numbers. But never mind that.

I’m 55 and I need to think more seriously about a viable nest of eggs for retirement. My aim is to not to have the equivalent of CHF 9000 after taxes monthly. Presumably, I’ll receive some from having worked an entire life, but that won’t be much. So say I’d need to receive CHF 6000 from my own investment activities.

I currently earn CHF160’ PA.
Costs - monthly
rent CHF2700
Internet CHF45
phone CHF 100
health CH 450
support to mother CHF200
Insurance CHF 50

As you can see there is room for investments. I won’t be the most energetic of investors - I admit. A quarterly overview seems manageable. I’ve been reading a few of the guides, but I don’t seem to make head or tails of it.

But where do I start?

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Well it’s very simple. Just like mass is equivalent to energy in physics, in financial markets capital is equivalent to interests…

If you want 6000/month, assuming a sustainable withdrawal rate of about 4%, all you need is 1.8M portfolio.

It’s up to you how you get there.

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How is this in any way helpful? What might be my steps to achieve that portfolio?

By earning and saving more money, that’s the most popular way.

Alternatively, you could consider retirement in a cheaper country. You can live very comfortably on way less than 6k in eastern/southern Europe and correspondingly would need much less capital, $1M ought to be enough to FIRE there.

And even in Switzerland, if you’d constraint the urge to splurge money on unnecessary things and move to a small cheap flat away from the big cities, I think living on around 3k/month is doable, so you can enjoy a LeanFIRE on $1M here too. Of course, if you have to support multiple dependants (kids, mother, non-working wife, etc) this becomes quite a stretch

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That’s a broad question. There’s plenty of advice on this forum if you search with more precise questions.

I can comment on the numbers. 160k - is that gross or net? You didn’t say what are your current savings/ net worth. 9000 monthly expenses seems like a lot. For reference, I don’t consider myself very frugal and spend 4000. Your rent, I guess it’s normal for a nice big flat in a city, but do you have to pay for it alone? If you have to support a non-working wife and kids then of course your costs would be higher.

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Again - how are you helping?

What exactly do you need help with?

You did not formulate any particularly actionable question in your original post. You said you want 6000/month and were bad at math, so I did the math for you, the answer is: get to 1.8M. You’re welcome.

If you read my first question I have trouble understanding numbers because I’ve read the advice back and forth and can’t make head or tails of it. Which I also say.

To then propose to read those is as helpful as to say “earn more.”

I consider myself very frugal and spend 4500.

How is this possible? Lol.

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I’m barely spending 2k, but I’m living with a working partner in own apartment. Mortgages are dirt cheap today.

Eg an ETF is that a good idea? This here thing “action investment”? The question is very actionable for someone whom doesn’t think that answer equal preaching.

Well, I still don’t get what kind of advice are you looking for. You want the best way to save a lot of money for your retirement with a 10+ year horizon, correct? Then you’re probably aware that this forum will recommend buying VT/VWRL ETF. What else would you like to know?

I live in a nice flat, have great holidays and keep buying in Coop and restaurants. If i cut down on food and holidays, I would spend 3000. That’s why I consider myself frugal, but not very frugal. If you read the numbers of some users of this forum then it becomes evident that there is always room for optimization, but I’m not willing to be that strict.

Did you go for a variable, fixed or libor mortgage? Yeah, mortgages are cheap, but real estate sale prices are crazy high, inflated by cheap loans. If somehow we would return to 5% interest rates, I wonder what would be the effect on prices.

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Yes. Assumption in the classical trinity study (that motivates 4% withdrawal rate) was to invest 50+% of portfolio into stocks. Modern ETFs provide a very low cost and diversified way for you to do that.

For the rest, the advice from the US is to invest money in bonds. But the problem with that in CH is that CHF bonds are negative yielding today - you pay money for the privilege to hold them, not the other way around. So you might want to consider a higher stock position, top up pillar 2/3 or real estate investment instead.

Short-term fixed. Paying 0.7%, which costs me 0.42% after tax as I’m at the highest tax bracket. I also get a sizeable discount on wealth for wealth tax purposes, 30% of house value.

Right. I probably wouldn’t buy in current market, at least in Zurich.

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And this includes everything? Taxes? Your own contribution to health costs? Gifts? Clothes? Etc.?

No, it doesn’t include taxes. I spend 50k on living and 50k on taxes & contributions. It’s a bit unfair to include income taxes when measuring frugality, because you’re punished by having high income. So how much are your expenses after tax? (But including healthcare)

Polish are naturally frugal :-).

I also don’t go crazy about savings. I pay my mortgage, own a car, eat and drink whatever I want, have awesome vacations with my son and an average of 4000-4500 CHF/month (taxes included) in spenidng is more or less in the right ballpark.

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Fair point. I think a good comparison should be expenses before taxes and savings rate after taxes. So in my case (living alone):

Expenses: ~3700 CHF
Savings rate: 31%

If I wouldn’t study this would decrease to 3300 CHF and my savings rate would go up to 40%.

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Ok, i am going to guide you by the hand for the numbers, but for the rest you’ll need to ask more precise questions…

  • as Pandas says, if you want your investment to yield 6’000 CHF per month, that makes 72’000 CHF per year. This means that according to the 4% rule you need a total target of invested capital of 72’000/0.04 = 1’800’000 CHF

  • if you are 55. i assume that you only have 10 years before retirement

  • the formula linking everything together is T = (1+r)^N * (C +S/r) - S/r wher eT is the target capital (1,8 M), N is the horizon in years (here 10), C0 is the initial fortune ( i would assume from your questions that you do no thave much, correct me otherwise), r the annual yield of your investments, and S the annual savings amount

  • We will assume an historical annual return of 7% for the stock market (i.e the “ETFs” tracking the world economy).

  • What you want is to solve for S, i.e how much you need to save per month before reaching retirement

  • According to above formula, solving for S gives
    S = r* (T- (1+R)^N C0) / ((1+r)^N -1)
    Plugging in your numbers.

  • r = 7%

  • T = 1’800’000

  • N = 10

  • C0 = 0

That gives annual savings of 130’250 CHF, or 10’856 CHF per month. Given your salary and your expenses, this is quite ambitious…

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And the biggest unknown here is r. In a 10-year horizon it could be 7%, or 14% or 0%. It is very likely that within the next 10 years we have a crash that destroys the return of the whole decade of growth. Or we could have inflation eat away the returns (our portfolio grows, but so do the prices). Every new investor should be aware of this, it’s not a risk-free game. If it’s not for your nerves then don’t even start.

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It’s even more complex than this. I am a freelancer, so my client pays me a net hourly rate, for easy calc let’s say 100 chf. He pays the gross amount, including VAT, thats 107.7 chf. Then I pay 10 chf as admin costs. Then I want to pay myself a salary, so I have to cover the employer and employee social contributions, 20 chf, but that includes 2. pillar. Finally, income tax, 20 chf. So from the 100 paid by my client, 50 lands in my account. 20 chf are my private expenses like rent, food. Now, what would you consider as my true income and expenses, and savings rate?

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