Midlife crisis, not pension crisis
After age 40, many of us want to change our lives. But we shouldn't do it at the cost of our retirement savings.
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July 22, 2013, Nils Aggett (text) and Raffinerie (photo)
When changing jobs, how much attention do I need to pay to pension fund benefits?
Good pension fund benefits are equivalent to an additional salary component. By law, the employer must pay half the pension fund savings and risk insurance. However, many companies are more generous, insuring more than is required by law and / or contributing over 50 percent. The less your employer deducts from your insured salary for the second pillar, the more take-home pay is left in your pocket. And the higher your pension fund contributions, the more attractive your future benefits. The funding ratio of the pension fund (i.e. the ratio of assets to liabilities) also plays an important role. Solidly financed funds with a funding ratio well above 100 percent can pay better rates of interest on savings capital. There are also significant differences between pension funds in relation to widow's, widower's and disability pensions.
I'm going to become selfemployed. Should I draw on my vested benefits for this?
If you withdraw retirement savings in advance, you risk being left with very little money later on - especially if your business doesn't work out as planned. You might only be entitled to a state pension when you retire. If you still decide to withdraw your pension fund assets in advance, you must first get confirmation from the cantonal social insurance office that you are mainly self-employed. You can then ask your pension fund to pay out your vested benefits. The request must be submitted in the same year that you become self-employed. If you are married, your spouse must give written consent. When making an early withdrawal, it's recommended that you also take out cover against the consequences of accident, illness, disability and death. You should also quickly start saving for old age again - for example, through pillar 3a (UBS Fisca). Self-employed persons can pay in up to 20 percent of their annual income (maximum 33,696 francs). It is often possible to join the second pillar Substitute Fund or an industry pension fund, if one exists.
Does buying into the pension fund make sense?
That depends on your needs - and on the "health" of the pension fund. If it has a funding ratio greatly below 100 percent, it's better to wait. You can deduct payments into the pension fund from your taxable income. The higher your taxable income and your assets, the greater the impact on tax. It's advisable to stagger purchases over several years in order to break the tax progression. If you intend to withdraw part or all of your retirement savings as a lump sum later, you must make your purchase at least three years beforehand. If you want to retire early, certain funds let you pay in a higher amount - another reason to plan purchases long term and be very clear on how much the benefits will be improved. This can vary immensely from fund to fund.
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