That’s a very lively and exciting discussion, where people disagree with each other. That’s what I like
So you’re talking about a Universal Basic Income for the retired. In a way, I think I agree with this solution. We should answer the question: what is the old age insurance for? Should it aim to guarantee the same living standard you had in your working years? I find that goal too ambitious and unnecessary, even 60% is misguided. In my opinion, old age insurance should only make sure you don’t starve to death when you’re old and can’t work. So yes, I think everyone should get the same money. If you live a rich life, it’s up to you to still have the money to keep it going once you’re retired.
My problem with AHV and income taxes is that it’s a tax on work and productivity, which is really not logical. We should promote work and entrepreneurship. The money for pensions should be taken from somewhere else. Taxing personal income is very complicated, requires millions of tax declarations and thousands of otherwise useless admin clerks. A rich person is indistinguishable from a poor person until he spends his money. So I believe we should focus on taxing consumption and the use of resources, especially tax exploiting the environment.
It’s compulsory if living in CH to pay AHV Beiträge, if not employed, then as a function of your wealth. (You might be able to sneak by undetected i.e. not paying, but do you want to risk that in your calculation?).
So calculate with this annual “expense” after FIRE in CH, until 65.
At 65 calculate with a monthly income from AHV, use today’s number to estimate & adjust for inflation.
That’s the way I do it.
I include a safety margin, yes in 40 years there may be “changes”, but my safety margin is in the total number. My opinion is putting safety margin in each individual position, while 100% safe would mean calculating with the worst-worst-worst-etc situation, which is unlikely. But my background in safety margins comes as an engineer, not an economist.
You as an immigrant will (in many cases) not get the same benefits as someone who grew up in Switzerland. I take issue specifically with the discrimination based on residency during education, e.g.
a) Studying in Switzerland at age 20-25, then working in Switzerland til retirement:
contributing AHV, receiving considerably higher benefits
b) Studying in an EU/EFTA country 20-25, then working in Switzerland til retirement:
not being eligible to contribute AHV, not even retrocactively (such as Swiss)
It’s not about the years of work.
Neither have many Swiss students worked these years.
Yet the latter might still receive much higher pensions due to their contributions for non-work. Which are unavailable to others completing their education abroad. Even though they might have worked just the same amount of years.
Due to your higher AHV contributions in (early) retirement, you would receive higher pensions, AFAIK.
A fictitious income will be credited to your AHV account, based on how much you contribution as a non-working person during these years of early retirement.
I don‘t. I take issue with being prohibited from contributing - retroactively, if needed - like a Swiss person. This discrimination shouldn’t exist under the (European) principle of free movement of people.
Of course it is also a pension scheme!
It pays pensions - and the more you contribute, the more you‘ll get out of it, in the end.
Though - and unlike many other pension schemes in Europe or the world - it is clearly a hybrid of both pension scheme and social security. This is a main reason why these discrepancies exist.
Especially for the average earner, earning about 80k/year in gross wages as you say, it very much works like a pension scheme based on contributions.
I look at it differently. Old age insurance protects you from the unpredictable variable of your life expectancy. We decided that at certain age the most of us are not able to work anymore, but we can’t really plan to have enough money for the rest of our lives, because we don’t know how long we will live. So I would not call living to a 100 “bad luck” , because, you know, there are ways to “opt out” if you don’t want to live that long.
I wonder how big the AHV premiums will be in 2050, when the old-age dependency ratio reaches 50%. In some places it will be even 80%. That’s 80 people aged 65+ for every 100 aged 15-64.
Important to note that it’s just my understanding from source. See here (1st page, last paragraph) as basis for your own research and/or conclusion:
“Da Nichterwerbstätige kein Erwerbseinkommen vorweisen, wird aus ihren Beiträgen ein fiktives Erwerbseinkommen konstruiert und auf ihrem individuellen Konto gut geschrieben…”
Maybe before you start bashing me, you can consider, that gold does not feed people. In the end if there are 2 million people working and 1 million retired, then these 2 million have to provide for 3 million. So the dependency ratio is very important. OK, maybe it will not be deducted directly from the salary, but it will be taxed in some way.
How much will my expenses be including taxes and AHV contributions?
How will my expenses be affected once I’m retired? Will I go to restaurants more often, travel more etc.? Is there enough room for underestimating future expenses (dentist, broken car etc.)?
When will I withdraw which 2nd/3rd pillar account?
How do I account for AHV 10-20 years before getting it? How does if affect my safe withdrawal rate of my portfolio?
Will my taxable portfolio last long enough till it’s possible and reasonable withdrawing tax-deferred accounts?
Especially the last 2 questions are tricky. Ideally you withdraw five 3rd pillar accounts with 61-65 and 2nd pillar accounts 66-70 (if you have just one, then when you are 70). That way they can stay invested taxfree long after you retire. But you still account for them in your overall assets. Lets make an example:
1 million CHF taxable
0.5 million CHF tax-deferred
If you stick with 4%/year withdrawing, that would translate to 60k/year. If you are 50, that might just work out fine. But if you are 45, you might end up depleting your taxable account before you withdraw enough retirement assets.
I only started with beancount recently and changed my mind about some of the accounts dozens of times already. I thought of booking Taxes as liabilities but I didn’t like it because in my mind it is expenses.
So in the end (or at least for the moment) what I’ve settled for was keeping Taxes as Expenses. However I book the difference of the taxes I paid in source taxes versus the taxes I should have paid (tax declaration) as Liabilities.
On the other hand, based on a post from the MMM blog I decided I needed to track my expenses without Taxes too. So I am doing that with bean query. I used this one:
2018-01-01 query "net_expenses_years" "
SELECT
sum(number) as Total
FROM
year
WHERE
account ~ 'Expenses' and not account ~ 'CH:Taxes' and not account ~ 'CH:Contributions'
GROUP BY year
ORDER BY year
"
–> You can add this to your bean file and then when you go to fava on the bean query page, you can type call this query like this:
run “net_expenses_years”
Also in Fava, when you are on the graph with the expenses (Income Statement > Expenses), you can insert this on the top to filter the Taxes out (assuming the account is name has Taxes in it):
^(?!.Taxes).
Honestly, in light of how you’ve been berating others on this thread to be “wrong” and accused them of not having “done their homework”, this assertion seems downright ludicrous.
Switzerland of course has a bilateral agreement with the EU that provides for free movement people, right to settle and a coordination of social security systems. Within the covered area, Switzerland adopts EU law with relatively few exceptions. One governing principle of which is that people shouldn’t be disadvantaged due to relocating, compared to “locals”.
I have sources and links if you need to have that spelled out further.
Crucially, the German system does not discriminate in the context of the European principle of free movement. For example, having worked in Germany for only 2 years, you can fulfil the required minimum with 3 additional years in any other EU member state.
Wer im Ausland studiert und nichterwerbstätig bleibt und den Wohnsitz in der Schweiz aufgibt, kann die AHV bis zum 31. Dezember des Jahres, in welchem das 30. Altersjahr vollendet wird, weiterführen. Zuständig für den Beitrag ist die Schweizerische Ausgleichskasse.
So students that study abroad are not discriminated against.
So if you studied abroad in the last 5 years you can still pay it for those years.
You must have had one in Switzerland to begin with.
That’s the point:
In case it needs clarification: It’s the ones that have grown up and studied abroad.
Person A) grew up in another EU member state, did their degree abroad. At age 25, person A immigrates to Switzerland and begins working until retiring at the the standard pension age of 65. After having worked here for 40 years, he or she will then have a multiple year AHV/AVS gap and therefore receive a considerably lower pension than…
Person B) same, but grew up in Switzerland, studied in Switzerland (or abroad), takes up work in Switzerland at 25, retires at 65. Even earning the very same amounts of money over 40 years as Person A, B will in many cases receive a considerably higher pension.
If free movement of people was free of discrimination, the outcome in monthly AHV pension should not make (that great) a difference.
After all, the amount of pension from AHV/AVS - like many other pension schemes, and even though capped - mainly depends on two things:
amount of money contributed and
years of contribution
And here comes in the discrimination: Person A can get valuable years of credits by contributing often only a nominal amount - de facto by mere virtue of having (had) residency in the country (note: residency as opposed to employment of seeking thereof, as is normally the case with pension schemes)
Yeah, it’s just that I guess most countries don’t let you count your years as a student for the pension. (I was lucky enough to be employed during most of my studies, so I have like 7 years of french pension, maybe I’ll be able to buy my coffee with what they’ll give me when I retire )
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