Many roads lead to Rome, including pension planning
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Strategies to maximize your private pension provision through smart investments and use of Pillar 3a
In this guide, we present the most important steps you can take to ensure your financial independence in old age.
When I ask my customers what they want for their third stage of life, it's always an exciting moment for me. Why? I quickly realize how well or poorly prepared they are for the topic. Which questions they have already asked themselves and which they haven't yet. One example. When it comes to retirement, many people have the feeling: working life today, retired life tomorrow. But the reality is as varied as the people themselves and that is the exciting and varied thing about my job as a pension planner. There are different ways to retire from working life and often a combination is possible. Here is a list of the most common ways:
Normal retirement at 65 from one day to the next
Resignation shortly before retirement
Early retirement, the financing is another matter
Partial retirement: reduction in working hours until the desired date.
Gradual reduction, e.g. from 100% to 80%, later to 60% and finally to 40%
Continued employment after 65 with the desired level of employment
Others say goodbye with a lump-sum settlement and are faced with a new situation
Others want to go abroad or return to their home country.
Whatever the wish, the task of the pension planner is to reconcile the facts with the legal provisions (in the various subject areas) and the client's wishes and to extract the maximum added value.
What exactly is looked at in pension planning?
The subject areas are
AHV
Pension fund (all regulatory options and consequences)
Third pillar
Your own retirement, everyday life, your plans, your life
Taxes (all applicable taxes)
Real estate (buying, selling, renting, giving away, amortizing, mortgage strategy, affordability)
Investment advice
Budget: what is my income, what are my expenses and how long will my capital last if I continue to live like this?
Investments, major expenses e.g. for travel, car, estimated inflation
My estate (inheritance and pension law): how much can I bequeath and what does this mean for my surviving dependants and how can I implement my will with appropriate beneficiaries (execution of the will).
What added value does pension planning bring?
When you retire and withdraw your capital, you are often "richer" than you have ever been in your life. This also means that the responsibility for the individual becomes greater. Psychology has shown that many people are overwhelmed by this. An extreme example is the lottery millionaires who are broke again after a certain period of time. The right approach starts with asking the right questions. My job as an independent pension planner is to find out what questions the client has not yet asked.
For an expert, many things are logical and clear, but the client usually only retires once. It is therefore important to ask the right questions and to have a proven financial specialist on your side, like a football coach who is on the sidelines for the entire game. Because everything has its sunny and dark sides. The question is always, how much sun can and will I tolerate?
The more the pension planner knows about you, the better they can help you to live the life you want. Of course, this includes financial benefits such as tax advantages, higher investment returns, etc.
What is often underestimated or overestimated when it comes to retirement?
Health & life expectancy
Without health, everything is nothing. As with finances, many people talk about it but do little about it. Keep moving every day, maintain social contacts, eat healthily and, above all, find your ikigai. Ikigai - what? Ikigai is a Japanese word that loosely translates as "that which is worth living for".
Studies have shown that older people with a task take 50% fewer tablets than the comparison group. This task, however small it may be, should be fulfilling for you. Whether it's looking after the neighbor's children (e.g. once a week), the house cat or caring for the plants. This not only increases your life expectancy, but also your quality of life. I can recommend the Netflix documentary seriesHow do you live to be 100? on this topic. Let me know what you liked the most. I look forward to your insights.
Your own death
99% of people only ever see the fair weather in their retirement planning. In other words, everyone stays healthy and old. Very desirable, but very far from life. One's own death is a taboo subject. Nevertheless, it is important to deal with your own death at an early stage and make appropriate arrangements to spare your loved ones unnecessary stress.
No plan B available
Many people do not have an alternative plan in the event that their original ideas cannot be realized. A solid plan B can provide security and help to overcome unforeseen challenges.
Expertise instead of regionality
Many people rely on regional advice and recommendations from their acquaintances, banks, insurance companies or other "financial people" instead of consulting an experienced expert who specializes in this topic. If the expert lives nearby, this is a plus, but not a must.
Let me give you an example: you are about to have a delicate knee operation. Do you go to the nearest hospital around the corner or do you look for an experienced specialist who has experience and promises you a higher chance of success?
Investments
The importance and complexity of investment decisions are often underestimated. In addition to the costs, performance is often even more important. How often has this fund, this bank, this asset manager beaten the benchmark, i.e. the market average, in the last 10 (or more) years (after costs!)?
Above all, I rarely see a plan B. Your lifetime is like an hourglass, so my tip: don't waste time with mediocrity, you are worth more. When private individuals invest themselves, the issue is too high or underestimated risk, lack of strategy and dangerous half-knowledge.
Expenses
Many people underestimate their future expenses in retirement. I earn less and therefore pay less tax. In pension planning and budgeting, such statements are clearly put into perspective. It is essential to draw up a realistic budget by phase of life that takes into account all possible costs, including unexpected expenses and estimated inflation.
Inheritance law
Inheritance law plays a central role in pension planning, but is often neglected. It is important to take measures at an early stage and to be aware of the legal regulations in order to avoid conflicts later on. This is often put off until it is too late.
Early retirement
The financial and emotional impact of early retirement is often not fully considered. It is important to carefully plan the long-term financial consequences and your own life planning. Especially if you live longer in good health than you think.
AHV
Old-age and survivors' insurance (AHV) is often overestimated. Many people rely too much on the state pension without making additional private provisions. The AHV alone is not enough to maintain the standard of living you are used to.
Housing in old age
The housing situation in old age is a decisive factor that is often considered too late. Whether you want to stay in your own home, move into a senior-friendly apartment or perhaps even emigrate should be planned well in advance.
Conclusion: Why is pension planning necessary?
Retirement planning is not just about the question of drawing a pension or a lump sum, but much, much, much more. As you have read above, there are some very important and personal questions to answer. You often don't know what you want at the beginning. Finding out what you really want and how you want to achieve it is precisely the task of the pension planner. The numbers are set, the question now is which route to Rome is best for me and will bring me many benefits.
The contents of this article were written by registered financial advisors. FinFinder.ch assumes no responsibility for the content or editorial content of the information provided.