Do you really need three million for your pension?

How much money does it take to feel good in retirement? Between three and five million dollars. This answer lets you sit down and get attention. At least three to five million dollars is what 70 percent of 553 professional and individual investors worldwide gave when they participated in a Bloomberg MLIV Pulse survey in mid-February.

Financial need estimates vary between world regions. For example, the proportion of people who think that only one million dollars is necessary in Europe is slightly higher than in the USA. This can be explained in part by weaker mandatory social security coverage in the US or higher individual health care costs.

But even in Europe, the largest group expects at least the equivalent of three million dollars to live comfortably in old age. Do you also need that much money for old age in Switzerland? Three million dollars, about 2.77 million francs at the current exchange rate.

Swiss model: wealth in the second and third pillars

At first glance, the figure seems high. Old age finance in Switzerland is based on three pillars. Two of them are related to assets. With the first pillar AHV, the insured are only entitled to be paid.

The pension fund, the second pillar, is the biggest asset for many people working in Switzerland. Pension funds manage assets of 1.159 billion francs divided into 4.48 million insured persons. On average, it comes to about 260,000 francs per insured. However, many have a significantly higher savings contribution when they retire.

With column 3a, about CHF 340,000 can be saved through working life payments and interest. With savings in Column 3a securities, this amount can be significantly exceeded, assuming prices will generally rise.

Assets in retirement also include all other assets and properties. If this includes an inheritance, real estate, or if someone has significantly increased their holdings through securities, someone in Switzerland could retire the equivalent of the current three million dollars.

“1.5 million assets will be required”

The cost of old age should not be underestimated. In addition, a significant portion of the population still Right But three million a little with this topic franc Pension assets will be more than enough at the moment. Pension fund specialist André tapernoux Calculates from consulting firm Keller Experts: “If you need CHF 100,000 per year, with an AHV contribution of CHF 30,000, CHF 70,000 per year should be available.” If you use the currently realistic five percent conversion rate, that would be about 1.5 million. franc Assets – pension fund and other assets – required.

From the experts’ point of view, it’s okay that a large part of the population will not reach three million francs in old-age savings – at least for now. “People who retire today certainly don’t need three million francs to maintain their lifestyle,” says financial planner Gabor. Gaspar from the consulting firm ATG Allfinanz and the Treuhand Group. “You can live on far less than three million francs.”

It is doubtful whether this can be said for future generations. Demographic change, falling interest rates and falling conversion rates have changed the situation: “If the pressure on the second pillar increases, then higher savings will be required than today,” he said. Gaspar. In this case, column 3a can no longer be sufficient to maintain the standard of living. “Therefore, higher retirement assets will be needed, which will need to be built up from additional savings efforts for retirement.”

Stock prices bother retirement savers

There are country-specific reasons why a higher requirement is already expected, especially in the USA. A common form of retirement and financial planning in the United States, 401k plan. It is a form of voluntary savings in which savings are invested with subsidies from the employer. Funds can only be withdrawn early under certain conditions and savings contributions provide tax advantages. This is, to some extent, comparable to column 3a savings in Swiss securities – the big difference being that Swiss 3a savings are completely private.

In the US, savings in stocks for old age have been prevalent among the general population longer than in Switzerland. Therefore, the assessment of future requirements strongly reflects current stock market and economic prospects. Also, three million marks is likely to be very common because professional investors participated in the survey and were likely based on higher income brackets with a more expensive standard of living.

(This text was first published on February 21, 2023. cash.ch published)

Source :Blick