I’ve been lurking on the forum for a while and it has been very informative, thank you.
About me
I’m in my late thirties, have no kids and have a solid long term relationship. We keep our finances separate for now, so the numbers are just for me. My current liquid NW fluctuates around 4M with about ~85% invested, ~10% cash and ~5% pillars. I currently spend about 80k a year and have been earning mid 6 figures for several years. I made some good investments which helped tremendously to grow my NW and I realize that I’m very lucky to be in this situation.
Work life
Recently, I’ve been thinking to take my foot off the gas and reevaluate what I want to do in the next years. I mostly like my job but it’s very time consuming, especially if you want to perform well, which is something I’ve done quite consistently in the last few years.
Current plan
I must admit that I’m not a big planner, I like to do things freestyle but here we go. My current plan is to quit my job in late spring next year and enjoy the next summer with friends and family and a lot of free time on my hands. I haven’t thought much past that, I’m really into the healthy lifestyle (sports and cooking), I love to travel and I’m very interested in everything that is tech related. My partner still wants to work for a few years, but she will gradually reduce to part time. Regarding the financial aspects I’ve been thinking to make a big payment into my pension fund this year to bring my tax burden down significantly and then invest a part of those assets when I can move them to a vested benefits account. This seems a pretty common strategy among people close to retirement, anything I need to be aware of? A part of that I plan to live off my investments for a while, I might pick up a low stress job at some point if I have too much free time on my hands and I need to add some structure to my life.
That’s all for now, happy to hear from you if you have some questions or suggestions
Welcome to the forum and congrats on your achievement!
Suggestions/remarks:
consider splitting your pillar 2 into two different vested benefit accounts when you leave your current company
if you indeed stopped working for good, you can withdraw the two benefit accounts in two different tax years and be taxed at a lower rate
if you pick up a new job you can move one of the accounts to your new employer and “forget” about the other one*
consider paying into pillar II this year and next year, lowering your tax rate in both years.
Note that if you pick up a less stressful lower paying job in the future, you likely won’t be able to pay into their pillar II given your lower salary.
look closely into how you’re invested and whether a shift towards a cashflow oriented portfolio – e.g. one that focuses on dividends – makes sense. That way you could (at least partially) live off the cash flow produced by your investments instead of selling off your investments.**
your cash cushion seems excessive to me given your expenses
* You are supposed to move both of them to your new employer. In practice, noone checks.
** Going out on a limb here, but I feel that with the right asset allocation your invested portion of your NW can produce the cash flow you need to live off (even if your 80k spend a year likely doesn’t include taxes?).
Well done, 4m late 30´s. nice work! Not much you need to be concerned with having such a warchest. 80k from 4 million is a 2% withdrawal rate, you´re likely to see your portfolio grow for many more years to come.
Mind if I ask what industry, and role/level have you reached you manage mid 6 figures?
I kind of dislike replying to my own post, but given the further answers so far, I feel some things should be further clarified?
@rhyme can probably best clarify this, but here’s some additional considerations which I think go beyond making sure the (0.85 * 4M)=3.4M have a return of at least 80k (or a withdrawal rate that sustains withdrawing inflation adjusted 80k p.a.).
Taxes, episode 1
Given the clues in the original post – mid six figure income – the income tax due would be low’ish six figure?
This amount would be due for this year, and depending on how you pay taxes, you’d cough up the low six figures this year and possibly next year (for the taxes due in 2024, filed in eary 2025, due in late 2025).
This is obviously heavily influenced by how much you intend to pile into pillar II by purchasing into it while you still can.
Cash Flow Required (aka Taxes, episode 2)
As guessed before, I’m assuming your expenses of 80k annually don’t include taxes.
Consider these scenarios:
If your income dropped to zero in 2025 (unlikely as you plan to work until late Spring), you would still pay taxes on your 2024 income – just something to keep in mind as you plan things out.
You will pay wealth tax (depends on your canton), but pencil in several thousand CHF for your net worth in taxable accounts – you should be able to make a good estimate based on your current tax bill as it sounds like most of your net worth is mostly in taxable accounts.
You will pay (perhaps not yet in 2025, but certainly afterwards, if you stay unemployed) AHV based on your wealth in taxable accounts. You can look this up in detail, but pencil in maybe roughly about as much as you’ll pay in wealth tax?
So, I suppose, adding to my original reply, maybe roughly calculate the taxes you’ll pay once fully unemployed and add that to your annual cash flow need of currently 80k?
Still aim for generating the 80k plus taxes/AHV needs with your 0.85 x 4M of current assets – I feel it’s doable, but I’m a little biased as I’m pursuing this myself as we speak (albeit, for a whole family).
Putting as much into Pillar 2 as makes sense to bring wealth into VB accounts when you quit. Ideally, you should have started earlier to have spread it across more years. Now it will not be possible to put too much without it being tax inefficient. If GF plans to work, maybe you can think about whether to work a bit longer to stretch out pension filling and also see if you can re-structure your work to be fewer hours and more stress-free: since there’s no downside if they fire you if you plan to quit anyway, you can really push hard on this.
Understand implications of wealth tax and AHV on wealth while you are not working
Think about whether you already have enough to retire early or whether your target number is higher. Esp. if planning a family, the budget will be different to your current lifestyle.
@alanmack I don’t mind being a bit more specific. I work for a large American tech company in the field of machine learning.
@Your_Full_Name Thanks for all the valuable input! You are absolutely correct, my expenses of 80k do not include any AHV/taxes, so the number will be >100k. I can clarify a bit more, I’ve paid my 2023 taxes fully and already made a >100k down payment for 2024 as I had an even larger cash cushion at the beginning of the year. With the rest of the cash I plan to close the gap I have in my pillar II (about 450k) this year. The reason being that my salary will probably exceed 600k this year. This means that I won’t have to pay any additional taxes and most likely will get back some money in 2026 if I really pull the trigger. Regarding my cash flow, my portfolio is as simple as it gets and consists of a single all world ETF. It will not generate the needed cash flow but I don’t mind withdrawing from it.
@PhilMongoose Unfortunately in my current job it’s all or nothing, I think it’s easier to change jobs than to switch to part time. Currently I’m pretty convinced that I will quit my job next year, I don’t want to fall prey to the one more year syndrome.
How do you plan to deal with your pillar 2? a) Leave it there until retirement age or early retirement (58); b) use it to buy a property to live in it; c) others?
Asking as I am not sure if you plan to somehow take early advantage of that capital or prefer to leave it there in a vested benefit account as further safety cushion
I come from a very different school of thought in the following respect than @Your_Full_Name
Since spending is a low % of wealth and tax optimization is mentioned, an alternative approach is to finance spending by taking out a small Lombard loan once current excess cash is deployed. The advantages are keeping your money working in productive assets and tax deductibility of interest.
You need to be comfortable managing a bigger balance sheet (assets offset by loans) and keep loan to a small % of assets to avoid margin call risk. If you plan to trade frequently there are “professional investor” criteria to watch out for.
Hey, so … I have, er, … a friend … who was in a similar situation. At a similar company.
The friend’s story around leaving his company is slightly more complicated, but in short said friend was in good standing with the company, said he needed a break for personal reasons, took a sabbatical, returned to work and explained that he wanted to pivot into a different direction within the company and needed a little additional time to find a new team and basically rode the wave of vesting RSUs as long as possible before quitting for good.
Depending on your vesting schedule, pushing things out by a month or by a quarter might be what you’re looking after.
If you’re into market timing, take into account the time bonus amounts are determined and paid out.
At any rate, being employed in CH you’ll benefit from those RSUs vesting whether you’re on unpaid leave or not.
I Said friend initially felt bad about pursuing such a strategy, but his advising surfing lessons teacher on riding the wave explained to him that in the grand scheme of things him making a couple more bucks was – excuse my language – pissing in the ocean when compared to the compensation of VPs or the CEO at said company.
Probably yes, but even if not, for me that’s just unethical behaviour. To each their own. Personally I would be more than grateful having an employer paying me mid 6 figure salary over years. I either give my everything at work or make a clear cut and find another employer that values my skills. I know, I’m the perfect tool to be (ab)used by an employer, but these are my values and my work ethic.
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