Everyone’s forced, it’s just a cost of being employed
If you earn more than 84600 per year it pretty much is blatantly stolen from you and becomes a kind of tax, except it’s not considered as such for double taxation treaties. Everything above this threshold doesn’t count whatsoever for pension benefits (techically it might count for averaging up for years when you didn’t work, but this is largely irrelevant if you didn’t grew up in CH, they won’t consider your years spent abroad)
Even the little that does count you probably won’t be able to fully cash out, there’s a possibility to get reimbursement but payout is capped to net present value of your future pension with a generous 3% discounting per year. Which will not be much if retirement age is not on the horizon for you
I recently moved my LUKB 3a to VIAC, but stopped contributing because in the end, it is only going to be delaying reaching FI, as I won’t be seeing any dividends nor be able to do yearly withdrawals to finance early retirement.
Even if there’s some financial advantage down the road when I’m at legal retiring age, isn’t it more important to be FI earlier on? Am I missing something obvious?
What age are you gonna be able to withdraw pillar 3a? 60-65? I’m not even sure. But once you’re able, it will become immediately available. I would definitely count pillar 3a as a part of your total wealth. And hell, pillar 2 as well! Just with realy shitty returns.
Imagine two scenarios:
You don’t use pillar 3a. Your FI sum is 500k. By the time you reach age 60 you still have 300k.
You put 50k in pillar 3a. When you reach FI, you have 450k invested independently and 50k in pillar 3a. By the time you reach age 60, you have 250k + 50k from 3a is being paid out.
Yeah, I definitely count them as part of the total wealth, I’m just worried about not investing that money in dividend-yielding investments. But you made me go back to my Google Sheet and run the numbers. According to the calculations, I should reach FU in 8 years, so assuming I’ll be maxing out 3a contributions for me and my wife every year until then, that’s 108’288.- total. Looking at the yearly progression numbers, that would only delay FI by ~9 months in the end (counting reinvested tax savings, and assuming same returns for VIAC as for IB). The difference doesn’t seem that big in the end.
I don’t get it - why? Dividend means tax. In 3rd pillar the dividends are constantly reinvested and tax free. Why do you need the dividends? The cool thing about VIAC is that their fund has the potential to deliver similar returns to the open market ETFs.
I again don’t get it. Why would it delay FI? If anything, it should speed up FI, because by investing 108’000 in 3rd pillar, you will save around 30’000 income tax.
I’m assuming that that’s how you’ll be able to retire early - live from dividends + safe withdrawal rate. If you have part of it in 3a, then that part will only be available much later in life and will not be providing dividends that you can touch before legal retirement age.
If on the other hand, the idea is to continue working until retirement age and amass as much money as possible, then I agree that 3a is certainly something you need to look at.
Dude, just count pillar 3a as part of your nest egg. So you will have lower dividends and higher sales until you reach 60, so what? Imagine all the people who invest in accumulating ETFs. They ONLY get money from selling and get no dividends. It really doesn’t matter if the money is stuck in 3a, because you will not need it anyway.
I have now read through the entire thread and there seems to be one argument missing in my opinion:
@nugget mentioned many times, that it comes down to tax savings VS the fact that the money is locked away. There is a third argument for the 3a pillar with VIAC, which is further diversification and risk spreading. There are also threads on this forum about the risk of going with only one Broker (IB) and whether it makes sense to split the cash and go with 2-3 brokers. The 3rd pillar can in my opinion be seen as one additional basket to put the eggs in.
it may have a point but it’s not big, if you check on the underlying assets. Apart from the CSIF funds that you cant get as private investor, it’s the same etfs as you can buy with IB or other brokers. Paying excessive fees for the same underlying isn’t my idea of diversification. on top of that (in my view) th US-based vanguard funds outperform any underlyings of swis 3a pillar products.
and for life insurence: superb diversification! but an entirely horrible thing to invest in…
@nugget I’m not talking about diversification of the securities, but rather of not entrusting a single broker with your entire fortune and life savings for decades. This is the thread I mentioned before: Interactive Brokers - all eggs in one basket?
and as I see it, if IB should disappear, for whatever reason, maybe at least VIAC will still be around with the 3rd pillar money I put aside. It’s just my paranoia, I undertand if others see it differently
It has a field named Vermögenserträge, which probably means investment income.Does it mean that you have to send them papers for every bank interest and every dividend, which would be equivalent to making a full asset declaration? That doesn’t seem to be worth the hassle.
Also is there any risk that they make you do a full declaration if you are close, but still below, to the limits of 120000 income, 200000 assets or 2500 investment income?
In Zurich city the taxes are much higher with the normal declaration than tax at source, so it seems very risky just for a few hundred deduction for 3a pillar to risk paying thousands more in taxes, it’s like playing with fire.
You might be right about being taxed at the source. I guess you can get an estimate using comparis.ch for the taxes and removing the 6700CHF 3a contribution from your revenue to see the difference and see if it is worth it.
Yes that should be the field. I took me some time to understand it but with software provided (online version as well) it calculates all the dividends for you. You only need to enter what security you bought and sold during the year. All the rest is calculated automatically by the tax tool so it is actually not that much work.
Yes, I did use comparis and found a big difference between the tax at source and the regular declaration rates, so it’s clearly worth it. Even more since you confirmed my fears that you have to declare dividends there, close to a full tax declaration.
So I’ll skip 3a this year and wait for next year when I’ll have to do a declaration anyway, and probably have to look to move to a lower tax town than Zurich.
at which point do you decide to start feeding your 3rd pillar money into a 2nd (or 3+ etc.) 3rd pillar account?
So far I have ~24k with VIAC, am 30 y/o and could either use that money to pay for mortgage in the future (probably not in <5-10y), or leave it until retirement/leaving CH (probably not <20y).
Assuming 6% growth (random number, with Global 100 strategy currently), the final amounts would be:
43k after 10 years
77k after 20 years
I’ve seen the tax bar chart in nugget’s post, and started thinking at which threshold would it be clever to “cut the pipe” into this existing one and start feeding another (or more with different portfolios).
Main reason for multiple accounts: “Kapitalauszahlungssteuer” as oulined in the article below.
Main reason for 5 accounts: All accounts have to be withdrawn within 5 years.
My personal reason for 5+ accounts: You would gain additional flexibility which accounts to combine when closing them. Benefits might be marginal but I also do not see any negative effects.
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