Swiss choose capital over income (cross-border guide)
Erwin Heri warns of the risks of being left with nothing
Contesto
In brief - More and more Swiss citizens are choosing capital over pension - Risk of being left with nothing - Problems with supplementary benefits to the old-age pension ## Key facts - What: Choosing capital instead of pension - When: At the time of retirement - Where: Switzerland - Who: Erwin Heri, professor of finance at the University of Basel - Amount: 500,000 francs or up to 1 million Professor Erwin Heri, an expert in asset management, has expressed concern about the trend of Swiss citizens choosing capital over pension at the time of retirement. According to Heri, this could lead to problems with supplementary benefits to the old-age pension, as people may consume their capital and then not have enough money to live on. For example, if a resident of Lugano decides to withdraw the capital of 500,000 francs, they may have to pay income tax and then face financial difficulties if they do not manage their assets well. Additionally, Swiss regulations provide that supplementary benefits to the old-age pension are only paid out if the beneficiary has a monthly income of less than 1,195 francs for single persons and 1,840 francs for couples. If the capital is consumed too quickly, people may not meet these limits and thus lose their entitlement to benefits. To avoid these problems, it is essential to carefully plan the management of assets in view of retirement. A possible operational checklist could include: - assessment of future financial needs - planning of asset management - consideration of investment options - consultation with an asset management expert > 'Choosing capital instead of pension can be risky if you don't have good financial planning' A comparison between practical scenarios can help to better understand the risks and opportunities. For example, if a...
Dettagli operativi
Practical Analysis Choosing capital over annuity may seem appealing, but it can also be risky. If people do not manage their capital correctly, they may find themselves without enough money to live on. For example, if a worker in the municipality of Lugano decides to withdraw their pension capital and invest it in a business venture that fails, they could lose a significant portion of their wealth. Furthermore, pension funds are excellent wealth managers and can offer a return of 3.5% per annum, which is difficult to achieve with a private investment. According to the 1985 Occupational Pensions Act, pension funds must guarantee a minimum annual return of 2%. ### Consequences The consequences of this choice can be severe. If people do not have enough money to live on, they may have to rely on supplementary AVS benefits, which are funded by the community. This could lead to an increase in tax pressure and a reduction in benefits for those who really need them. For example, in the municipality of Locarno, supplementary AVS benefits increased by 10% in 2020 due to increased demand. Example of annual return calculation: - Initial capital: 100,000 CHF - Annual return: 3.5% - Annual amount: 3,500 CHF Operational checklist for capital management: - Assessment of one's financial needs - Choice of a reliable wealth manager - Diversification of investments - Regular monitoring of returns > "Capital management requires great responsibility and good financial planning" ⚠️ It is important to consider the risks and consequences of a wrong choice. 📊 For example, if 100,000 CHF is invested in a business venture that fails, a significant portion of one's wealth could be lost. 💡 It is important to consider the possibility of investing in a pension fund or another form of long-term in...
Punti chiave
Action To avoid financial problems, it's essential to manage your assets correctly. Professor Heri advises starting to save today and drawing up a personal budget. It's also crucial to divide your assets into different parts, depending on your various needs, and choose a more aggressive approach to retirement planning. For example, a worker living in Lugano and earning 60,000 francs per year could allocate 10% of their salary to the 3a pillar, which is tax-free up to a maximum of 6,768 francs per year, as stipulated by Swiss law since January 1, 2022. ### Procedure To start saving, you can use the 3a pillar with a high equity quota. It's also essential to be aware of your needs and plan accordingly. A concrete example could be the case of a couple living in Locarno with two children, with a total income of 100,000 francs per year. They could decide to allocate 20% of their income to the 3a pillar and invest the rest in a diversified portfolio of stocks and bonds. For more information and to calculate your assets, you can use our salary calculator. Additionally, it's essential to keep in mind the following operational checklist: - calculate your net monthly income - define your short- and long-term financial goals - choose the most suitable investment tools - regularly monitor and update your financial plan. For example, a worker living in Bellinzona and earning 80,000 francs per year could decide to invest 10,000 francs per year in the 3a pillar and use the rest to cover daily expenses and invest in a pension fund. > Time is money, so starting to save as soon as possible is fundamental. In summary, managing your personal assets requires careful planning and in-depth knowledge of the available investment tools. It's essential to be aware of your needs and financial goals...
Punti chiave
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Frequently Asked Questions
- Why do the Swiss choose capital instead of a pension?
- The Swiss choose capital instead of a pension because they can have access to a larger sum of money and can manage it as they wish.
- What are the risks of choosing capital instead of a pension?
- The risks of choosing capital instead of a pension are that people might consume their capital and then not have enough money to live on.
- How can I manage my assets correctly?
- To manage your assets correctly, it's essential to create a personal budget, divide your assets into different parts, and choose a more aggressive approach to retirement planning.