Analysis of Barbara and Thomas Müller's ongoing costs.

Fallbeispiel Ehepaar Müller

Barbara and Thomas Müller recently bought themselves a beautiful apartment for CHF 700,000. They have financed the purchase of the apartment with a Fixed-Rate Mortgage of CHF 500,000 at an interest rate of 1.7%. The Müllers are looking forward to retiring in fifteen years' time. They know that their income will be lower in retirement and are wondering whether or not they will still be able to afford their home once they have retired.

In order to ensure that they will be able to look forward to their retirement with peace of mind, Mr. and Mrs. Müller perform an assessment of their financial security well in advance. Together with their UBS advisor, they perform an analysis of their finances, comparing their current financial situation with their prospective situation in retirement.

 

By the time they retire, the Müllers will have amortized 67% of their mortgage. As result, their interest expenses will fall in retirement and they will no longer be required to amortize their mortgage. Their ongoing costs will therefore be lower.

Because their gross income will also decline along with their living costs in retirement, the Müllers and their UBS advisor assess whether their apartment will remain affordable once they retire.

Affordability of the apartment

  Today   In retirement
Total ongoing costs (assumed) CHF  34,222   CHF 30,333
Gross income CHF 130,000   CHF 80,000
Affordability (max. 33,33%)   26%     38%
Gross income shortfall       CHF 11,009

Numbers represent annual figures unless stated otherwise


The analysis shows that once the Müller's have retired, they will have an annual income shortfall of CHF 11,009. They are very pleased to have discovered this well in advance at the consultation with their UBS client advisor. They can now use this information to start actively adapting their budget right away.