Would you buy 3rd pillar to save 1.7k CHF, Geneva

Would be greatful to have your opinions.
This year I would save 1.7k if I buy fully the 3rd pillar. but as we have to pay tax the day when we withdraw the money and the possible opportunity cost, not sure if it is worth it to save 1.7k.
Thanks

Are you saying your tax rate is 25% ? Then yes, it is clearly a good idea to put it on a low-fee 3rd pillar investment acount.

thanks. which tax rate you are talking about? the rate when we withdraw the money from 3a? for this one I don’t know what is the rate :sweat_smile:

3a is worth it because you don’t pay wealth tax on it, there are no taxes on dividends and the initial saving is just the cherry on top.

Withdrawing is also only around a 5% tax.

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I am talking about your income tax. You said you will save 1700/6826 =24.9%

When you will take your money back, you will only pay a maximum of ~9%. If you open multiple accounts, you will pay less. You can find your canton’s table for withdrawal.

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It depends on what you’d be doing with this money otherwise and what kind of 3rd pillar investment you’re looking for.

In what kind of 3rd pillar product would you put that money? (Savings account, low fee investment (what stocks %?), high fees investment (what stocks %?), insurance (what product?))

Also, Geneva has tax deductions for 3B investments, you may want to check if you’d benefit from that too.

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haha thanks, indeed I have understood you, even I wasn’t sure. shall we put 6826 on each account until we can’t open any more account? :joy:

thanks. I only earn a Swiss median income so I guess for the moment I don’t need to think about wealth tax as I am not rich enough to be taxed?

when you say tax on dividend, I suppose you are talking about if the 3A is invested in stocks like VIAC?

Thanks a lot @Wolverine you have a very valid point. If I put in 3A, I’d put in a savings account or maybe VIAC.
Currently 100% of my money sit in the bank, not invested. if there will not be a stock crash like in March, it will probably continue staying @bank without interest rate. I have a watchlist of about 15 stocks and if any drops low enough I would put a big % of money in it. (value investing/“Rule 1” investing). Currently they are all overvalued according to “Rule 1” calculation. Do you have any additional comment for my initial question?

I Googled 3B in Geneva but haven’t found an official link explaining the tax deduction, only found info on a few brokers’ website stipulating a deductible amount of 2’196 CHF for a single employee. I assume this is on top of the 3A deduction and everyone is eligible?

The Canton of Geneva is special for tax deduction for 3a and 3b.

  • You can max out the 3a until 6’826 CHF
  • You can max out the 3b until 2’200 CHF

So you can deduct an amount of 9’026 CHF as 3a and 3b. Quite interesting if the 3b wasn’t in relation with a life-insurance.

I don’t know if there is another financial instrument to use the deductible tax of the 3b without a life-insurance…

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Timing the market doesn’t work.

It is always more likely than not, that the stock market will be higher in a year than now.

There is also the story of bob who always invests at every market peak.

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Love it!

Or to use the saying: The best time to invest was yesterday. The 2nd best time is today.

Go for it!

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Thanks. if the 3b is only for life insurance, it seems the consensus on this forum is not to mix savings and life insurance. would be great if there is 3b as savings acocunt or fund speclating like VIAC. Does anybody know such 3b?

Thank you. I was referring to Phil Town’s value investing.

3A cash savings account and high stocks percentage low fees ones (VIAC, Finpension, frankly) are the ones that make sense to me. It depends on what you intend to do with that money, cash savings make sense if you desire to use that money in just a few years or if you are unwilling to invest in stocks. Stocks make sense if you have a longer term horizon and don’t mind that the value of your account might drop in the meantime.

In that context, yes, it makes absolute sense to me to invest in a 3A solution in order to save taxes, provided you still have enough outside of it to cover your needs.

I’ve probably found the same sites that you did, I don’t live in Geneva (nor Fribourg) so haven’t searched more thoroughly on this. The information I have is the same as Yanikuza. Since it seems limited to life-insurance solutions, it is probably riddled with fees. It may make sense if you have dependents to protect and some people have probably found ways to make the tax deduction work to keep more of their wealth to themselves but that probably wouldn’t be me.

It is. That doesn’t mean that there are not situations where a pure risk insurance may make sense. Most of us don’t need it because the standard coverage is generally good enough but if you have dependents and/or a special situation, looking into it might be worth the time.

Some companies like to cover some of their key people too, I’d guess they have a good use for 3B insurance policies in that context.

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Thanks and Merry Xmas to you! Sounds like your view on 3A invested in stocks are: they may drop in the short term but will increase for sure in the long term? and this is why we should put money here if we don’t need to take the money in a few years and have more years to wait if the value drops?

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It isn’t completely sure, but there is only a very low chance that you will be lower in 20 years than you are now. It is much more likely that you’ll have more than twice as much as now.

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Merry Christmas!

Same as xorfish: nothing is ever for sure in the financial markets, that’s why our global portfolio should be diversified, across countries and asset classes. If you are invested in stocks worlwide, the scenarii that would take your stocks permanently down are pretty dire ones that would have required you to adapt in another way anyway. If you invest only locally, then other classes of assets become more important.

Regardless of geographical diversification, I always advocate putting some part of our portfolio into other assets, the extent of it depends on our personal situation.

Also, if you invest heavily in stocks and have a date at which you’d start to need that money, it’s advised to start gradually moving toward safer assets as that date draws closer.

Edit: Aaaand, rereading this, I realize I haven’t been clear at all: while I advocate that our global portfolio be diversified, I think 3A is a good place to hold stocks, especially dividend ones (and swiss stocks often have high dividend distributions so funds tracking the SMI and the likes have their place in a 3A solution) since they’re tax sheltered.

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