The 2nd Pillar Dilemma.
Lifelong annuity or lump-sum withdrawal: where is your break-even point?
The choice depends on many factors.
Income tax during retirement, the withdrawal tax of your canton, your life expectancy, and your ability to grow your capital.
One must not overlook the inheritance aspect.
The annuity will partially survive you but will cease upon the death of your spouse. Your children will never inherit it, unlike capital, which passes from one generation to the next.
ANNUITY STRATEGY |
LUMP SUM STRATEGY |
Did you know?
Conversion Rate: 4.5% is an average rate; it accounts for both your mandatory and extra-mandatory portions.
Return (ROI): This is the net annual return you expect to achieve by investing the money yourself or through a private bank.
Taxation: Capital is taxed only once upon withdrawal, whereas the annuity is taxed as income every year.
Inheritance: Warning! The annuity ceases upon the death of the couple; children never inherit the annuity, unlike the capital.
If the inflection point is low (e.g., 15 years): The annuity provides security and pays off quickly.
If the inflection point is high (e.g., 28 years): Capital offers much greater freedom and can be passed on to your heirs.
Important Note: This calculation is a mathematical projection based on averages and does not constitute personalized financial advice.
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