Nice gains and an even nicer watch! Your savings rate is through the roof and I think you’ve earned a bit of luxury. Coming from someone who ust spent 600+ to service one of my watches and I still should send one for repair.
45% is commendable for sure, but nothing extreme IMO.
Well done @MrCheese! And congrats on rewarding yourself - it’s a nice symbol of an achievement.
@s-g The “derivative”/delta concept is quite interesting! (i look at it through a “waterfall” graph, but this is a neat view I will adopt too)
45% is including taxes. Excluding them the savings rate is at 60%.
2015: CHF 3.7k
2016: CHF 30.6k
2017: CHF 69.3k
2018: CHF 63k
2019: CHF 122k
2020: CHF 245.8k
This year’s increase came to a large extent down to stock gains. The plan is to reach 500k by 2025, which does looks realistic after the increase this year. Although I am sceptical that the stock market will continue to churn out gains as up until now. I guess I will find out, one way or another.
My savings rate is 50% (including taxes and AHV, ALV, IV, meaning they‘re all part of my expenses), but in that figure I include 2nd pillar contributions from both me and my employer.
I still don‘t know if one should include taxes to do the FIRE calcultion as I‘d still have to pay taxes on my wealth and dividend income after RE. Plus health costs rise with age, so it might just even out in terms of what your life cost will be.
See this topic about that part. I came to the conclusion that the income tax on the 70k I will need when FIRE will be neglectable (e.g. <10k CHF) and started excluding all tax related numbers from my savings rate. I also do not count Pillar 2 to the net worth as it’s only accessible much later in life. If I consider to leave Switzerland then it’s just a nice bonus… (sure could be around 250k CHF in 10 years but still “only” around 10% of the planned FIRE number).
Here is my net worth progression
Networth includes equity in our apartment also (approximately 50 percent of total)
Liquid Net worth excludes home equity and contains cash, stocks/ETFs, crypto and Pillar 2 and 3a
Note: the big jump from 2019 to 2020 is because we received support from our family for 50 per cent of the downpayment
Going with the flow, I’m was a bit nervous about doing this but it revealed some insights. For instance, I was an idiot for keeping so much cash. I knew at heart it was far from ideal but our situation was complicated until very recently. There are some anomalies which the graph doesn’t show, for instance in some years I received tax returns for two years at once.
The data has been plotted with values from year end, taking into account EUR.CHF closing exchange rates. I started my 3rd pillar only on the second half of 2020 so it’s barely visible as a blib at the end of 2020.
I have more granular tracking for the cash in YNAB. I also started tracking the 2nd and 3rd pillars as well as equities monthly end of this year. Hopefully next year there’s an easier way to use those data points.
Some lessons learned:
- keep on converting cash to equities - should I even pick up the pace?
- my 2nd pillar is a significant (way more than I thought) portion of my NW
- between 2015-2019 I didn’t really manage or even actively invest in my portfolio at all and it shows
- this was kind of therapeutic so I might contribute in the “Pants down - yearly spending” thread too.
Luckily our uncertainty issues should now be behind us and I can continue what I did in second half of 2020.
Edit: the cash position should be about 20k higher. I forgot one account when generating the report in YNAB. NW is therefore a shy of 390k.
It is very important that you choose a cash safety cushion were you feel comfortable (even if that might mean missing out on optimized returns long-term). However, everything above that should be invested unless you have something big upcoming (house/car). You could for example invest everything above that cushion over the next 12/18 months on top of your usual investments.
I’d assume anyone with a FIRE mindset has (or must at least target) a savings rate in excess of 20%, or more than your typical pension contribution. Hence, I would have assumed the exact opposite.
Your viewpoint strays far from the average person. I myself have access to a 1e plan too, but last I heard less than 1% of second pillar assets were with 1e providers. And if your reach significantly above 20% total contribution on average prior to your early retirement, your solution must offer exceptionally generous contributions. Most importantly, if you have both access to a 1e plan and such comfortable fringe benefits in the first place, your generous salary should come with a savings rate able to dwarf even those contributions.
Of course if you add third pillar and buy into your second pillar everything changes. But again, buying into second pillar is a terrible idea for the average investor.
And yes, I also add both employer and employee contribution as income and saving. I do however not assume any deferred taxes (decades away with top marginal tax somewhere below 6.5%). But calculating savings rate is a completely different topic (and we are already too off topic).
That much? I would be surprised Maybe in average 20% of all income is saved, but the median saver is probably below 20%.
I read a few years ago about the average savings in Switzerland being 13%, but have no recollection where I read it (maybe a rts.ch article ).
I disagree on the pillar 2 investment. You‘ll get a short term tax saving but the yearly return is between 1-2%. Don‘t think it‘s worth it. Ideally you would be self-employed without second pillar and put 20% or up to max of 33k (whichever is smaller) 3A
Are you invested 100% in equity? If not, what return do you get on the “safe/low vol” part of your portfolio?
Well to be fair, I can‘t really buy (much) into 2nd pillar. I get 1.5% from having part ownership of my bank (very low inv). This ownership I should be able to sell back anytime, where as I don‘t have plans that would allow be to get something out of the 2nd pillar before my pension age (which would be at age ~70 until I get there)
My opinion is therefore biased and it all depends on your goals.
I guess mine just turned unhealthy then.
For 2020 the interest was 2%, for 2021 0.5%.
It wants me to register. But from what I see in the thumbnail, that is for all people counted together. Of all income, 20% is saved. This means a median person saves quite a bit less than that (maybe 13% as mentioned by @Mobius). High earners save more and pump up the arithmetic average.
You have a good pension then! I‘d need to do some research on mine (recently switched employer), but as I probably won‘t work there until retirement then the pension fund would change again. Do you trust it to be healthy for your whole professional career and will you stay with the same company/pension?
About the second pillar. My gf has been living in Switzerland for relatively few years and therefore has not paid all her contributions since the age of 25. On her Versicherungsausweis I have seen that she has a “Mögliche Einkaufssumme” of 65000 chf. Her capital, at 36 years, is only 13000 chf. In your opinion is it worthwhile to pay this amount, or is it better to invest in VWRL (or similar). Obviously she already has the max in VIAC.
I’d say the returns on VWRL are consistently higher in the long term. I personally don’t count or calculate with the second Pillar for FIRE.