Hello from Zurich (41yo)

[Laggy]

Hi Forum,


long time lurker since a while, heard about ER / FIRE 5 years ago.


Originally from Germany, moved to Switzerland >10 years ago, all together with my DW (41yo, too). Focussing on our jobs, friends, amazing vacations and no children but pets as a substitute (), which was great so far.

But for the first one at least myself is now in a situation where I get paid a good amount of money, but the fun is lacking since >three years. I´m feeling exhausted about w*rk and don´t believe this feeling would be gone just by switching jobs. Not to mention that it won't be easy to get a similar salary elsewhere, since the current one was clearly (even though "deserved") by being "in the right place at the right time.", four years ago.


Therefore I´d try to stay a couple of years longer, as this shortens the time until finally getting FI. Plan is to RE way before 2030 - not sure if this is going to be realistic, but hey, a man needs a plan


Net worth target: 3.0m CHF (when moving back to GER) - 4.6m CHF (when staying in CH)

Expected yearly spend: 108k (GER) - 160k (CH)

Current yearly spend: 135k + separate taxes on salary
Cola´d state pension (available in 2047) current value: 27.6k




Combined Gross Income: 550k CHF

Current state:
Cash: 160k
Stocks: 390k
2nd pillar (similar to 401k, I believe): 1.1m
Appartment 1.7m, 350k CHF paid, 1.35m open with a fixed mortgage of 2.2% for another 12 years. Due to CH´s tax system, the plan is to reduce the mortgage to 65% but not more.

Total: 2.0m CHF


Networth increase over the previous years and including 2023 so far: 136k (2019), 357k (2020), 373k (2021), 60k (2022, what a year!), 292k (2023 so far).


I will use this thread to provide quarterly updates, and answer any question

 

[ut2sua]

Welcome to the forum Laggy. It sounds like you have a plan. If you want meaningful comments from others, it may help to provide a bit more info such as which stock market(s) your investment is in. For the US stock market (with and without some international components), most folks in this forum are comfortable with less than 4% withdrawal if you want to FIRE in your 40's, but it will depend on your other income after FIRE.

 

[target2019]

Laggy,
Welcome to E-R. I rearranged some of your figures into USD.

In the U.S. we do not include income in "invested." What's left over from income, after you spend expenses, is added to invested, over the period of years you work. So you would add 5 columns, and add appropriate numbers for each year.

Your COLA'd state pension is future income. So, if you retire in 2030, it will have a larger value I imagine. In 2031 your regular income stops, and this future income begins.

You don't mention your spouse, or what his/her plans are. I do see the income now is for two, but what will happen in 2030? Will you both retire? So that is another possible difference between us. I (and others) include the spouse's number in the plan. Are her investments included in the total?

I think with the salaries you mention, you'll hit your target. The question is whether the target will provide sufficient income for the remainder of two lives. In the U.S. some include an end date somewhere in the 90's when planning for the lifetime. So, if you're 50, the plan must run out for 40 years, without failing. This is where we look into Retirement Calculators.

Nice to meet you. Many of us can trace our roots to areas of Germany. Superb views y'all have.

 

[target2019]

I became curious about the 2nd Pillar:

The 2nd (occupational) pillar of the Swiss pension system is intended to complement the 1st (state) pillar, so that you can be sure of receiving a reasonable pension in retirement. If you leave Switzerland, become self-employed or buy a home, you can have your accrued pension capital paid out early.
https://www.ch.ch/en/retirement/old-age-pension/the-2nd-pillar/

I only went that far, and looked at the various sections. If I was in that plan, then I'd look further to see how it's invested. Probably a secret in Switzerland!

 

[Laggy]

Hi,


thank you both for your input and the warm welcome




Some feedback on your questions/statements:

it may help to provide a bit more info such as which stock market(s) your investment is in

50% of the amount is based on two US tech companies and was part of our salaries in the previous years (tax already deducted). Would you recommend to reduce this amount? The other 50% are in a Vanguard FTSE All-World ETF.

In the U.S. we do not include income in "invested."

Neither did I. I believe my formating wasn´t great. Yours is much better, thank you for that - the current mismatch is the 350k that we already paid for our apartment, and which I´d say can be seen as part of net worth..?

Your COLA'd state pension is future income. So, if you retire in 2030, it will have a larger value I imagine

Yes, I agree. It should grow every year we are still working + get the additional cost of living adjustment. But as we will only receive it starting in 2047, I don´t use it for my current calulations.

Will you both retire? Are her investments included in the total?

yes and yes. At least this is our plan for now, but I wouldn´t wonder if the OMY syndrom is going to hit her. In any case, we already discussed about this scenario, the biggest concern is that moving back to Germany wouldn´t work out. Any way, both of us are open to adapt.

 

[Laggy]

I became curious about the 2nd Pillar:

I only went that far, and looked at the various sections. If I was in that plan, then I'd look further to see how it's invested. Probably a secret in Switzerland!

I´m more than happy to answer:

2nd Pillar is the private occupational pension. Each employer needs to have its own pension fund (usually the case for big companies) or be a part of one of the 1000+ open pension funds.

Each pension fund can have their own strategy on how to invest their members money. Usually it´s a mixture of everything (international stocks, local stocks, real estate, bonds, etc.). Depending on the height of one´s salary, there is a good chance that two pension plans are mandatory, where some capped amount is planned by pension fund only. The strategy for the separate amount can usually be chosen by employee.

Both of us have such a second 2nd Pillar plan, and we have chosen a mixture of 60% stocks, 30% bonds and 10% real estate.


capital gains in the previous years were between two and seven percent.



There are a number of tax advantages for the 2nd Pillar, e.g. you can do voluntary contributions which are fully tax decutable.

 

[target2019]

Laggy,
R.E. like our home is an investment of some kind, but it won't generate future income, like our equity investments.

In our situation, yes, the paid-off home is worth 2X's what we paid. But if I sell it, where do I live? So, this R.E. asset is different in practicality than my 401(k). It is shelter, and one day I may reap capital gains from a sale, but for now I don't include it in the category of investments like mutual funds, 401(k), IRA, etc.

How *you* think of your apartment is entirely up to you. Perhaps one day you will move to Germany, and rent the Swiss apartment. Then it becomes a different type of real asset (to my eyes).

 

[MarieIG]

Welcome out from the shadows Laggy. I hope to hear much more from you in the future.

One thing that jumped out at me was your heavy investment in two tech stocks. Yes - you could really make bank by the time you retire - but, of course it is a risk. Maybe, just maybe, you might want to take a bit of profit off the top from time to time and move into an all world diversified, inexpensive etf/ fund.

Below are two commonly recommended references. I would suggest that you pursue the frequently asked questions, as it may give you some ideas (don't ignore the second to die scenario and potential loss of income) and with regard to FireCalc - you would need to modify and/or do some substitutions. (The bottom line is having income to cover expenses for you and your spouse throughout your retirement.)

Some Important Questions to Answer Before Asking - Can I Retire?

FIRECalc

 

[Koolau]

Welcome, Laggy. It sounds like you have a unique introduction. I hope you participate often.

 

[ut2sua]

Hi,

50% of the amount is based on two US tech companies and was part of our salaries in the previous years (tax already deducted). Would you recommend to reduce this amount? The other 50% are in a Vanguard FTSE All-World ETF.

If I understand correctly, these are stocks of companies you are/were working for. In the US, there will be tax consequences for converting these to ETF's if you have large capital gain so you may want to convert them slowly to reduce concentration risk while keeping tax manageable (if that is what you want to do). I don't understand your tax system so you know more than me there. History has shown that many "invincible" companies have gone down in the past, so most folks would like to diversify their stock holding.

 

[Laggy]

Thank you all for your nice feedback and comments, much appreciated.

I see the logic in slowly migrating the two big stock amounts to the ETF. There is no capital gain related tax in Switzerland (only dividends are taxed), so this would be straight forward. Great suggestion!

About Firecalc: thank you, I used it already more often than I should, its an amazing piece of programming, and I like playing with all the options it provides. My numbers are based on a 3.5% yearly spent with a 40 year horizon, including Cola'd pension.
The only unknown is the exact date for retirement and the additional yearly contributions. But this is another detail that will get more clear in the comming years.

 

[finnski1]

Welcome. Switzerland is a beautiful country. Haven't been there yet but hope to.

 

[target2019]

Thank you all for your nice feedback and comments, much appreciated.

I see the logic in slowly migrating the two big stock amounts to the ETF. There is no capital gain related tax in Switzerland (only dividends are taxed), so this would be straight forward. Great suggestion!

I don't think you mentioned citizenship, but...

If you are a German citizen only, doesn't Germany tax capital gains when they are realized?

My perspective is U.S. citizen. So, for example, if I lived in Germany, I'm not sure if Germany or the U.S. would tax my gains, but I know someone would.

Obviously there's a lot I don't understand about Europe.

And I would echo that having individual stock in two great tech companies is a wonderful thing. But it may not go on forever.

So you know, the prevailing opinion on boards like this one is that holding individual stocks is not the way. I personally hold some stocks for various reasons. But I'm always trying to diversify with a growth or value fund. If you can sell these stocks with no gains tax, then moving all to a diversified fund makes a lot of sense. But if you sell all, and find out you're subject to gains tax, it will be a large gash.

 

[Closet_Gamer]

Welcome! Great to have you join. Good and smart people here.

Enjoy.

 

[Laggy]

If you are a German citizen only, doesn't Germany tax capital gains when they are realized?

My perspective is U.S. citizen. So, for example, if I lived in Germany, I'm not sure if Germany or the U.S. would tax my gains, but I know someone would.

Some special tax rules are existing for U.S. citizens:

From Google: "Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live."

On the other hand, nothing like that exists in the EU, and certainly not for Switzerland. The only factor for capital gain and income taxes is where you're living (country of residence). Having said that, there are some special cases for cross border work and real estate.

So no issue with capital gain taxes.

 

[target2019]

Laggy,

Actually, a U S. citizen who takes up residence in Germany sees all income and gains reaped while a resident there taxed by Germany first, and then by the U.S. Of course the U.S. counts foreign taxes paid as a credit on the U.S. return. I am not a tax expert by any standard though.

I'm befuddled that you'll owe no gains tax, but it is not the first time.

 

[Laggy]

Here´s the first update, numbers represent net worth + real estate:


08/03/2023 - CHF 1,650k + CHF 350k ($1,880k + $399k)
01/03/2024 - CHF 1,790k + CHF 350k ($2,105k + $399k)

I have followed the advice of some members and reduced the high proportion of our company shares by approx. 40% and have shifted the money to a Vanguard World ETF.

 

[oiseux]

Congratulations on your further progress. Clearly the high concentration in a company stock can produce big rewards but also high risk after point, especially as the company matures. I was at that point in the past as well but didn't diversify fast enough...


I was an expat in Switzerland as well. I enjoyed it, other than the high cost of living (but I got a geo differential as a short termer). I was in the French speaking section.

 

[pacergal]

Congratulations, looks like you are progressing well.

 

[Laggy]

Here´s the first update, numbers represent net worth + real estate:


08/03/2023 - CHF 1,650k + CHF 350k ($1,880k + $399k)
01/03/2024 - CHF 1,790k + CHF 350k ($2,105k + $399k)

I have followed the advice of some members and reduced the high proportion of our company shares by approx. 40% and have shifted the money to a Vanguard World ETF.

Pretty decent first quarter in CHF, mainly thanks to bonuses. There´s a bit of "loss" due to poor exchange rate when converting to Dollars. I kept the previous Dollar numbers/ exchange rate within the old quarterly updates, which is misleading - Is there a preferred way in this forum?

04/01/2024 - CHF 2,082k + CHF 350k ($2,300k + $386k)




Although this quarter looks great, I estimate a much lower growth or even decline in the next quarter, driven by a few improvements to our property, mainly conversion of the existing 110 sqm stone terrace to millboard composite decking.