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Does it make more sense to withdraw my pension fund savings in one shot when I retire, or do I get a better deal by accepting a regular pension?
Hi there,
Pensions are generally a more secure choice with regards to withdrawing Swiss 2a occupational pension fund assets. You receive a regular pension from the time your reach retirement age until the time you die, and the rate is set by the government.
Even long after the contributions you have paid into your pension fund are depleted, you continue to receive the exact same pension until your death. If you live to a ripe old age, you may receive a much larger return on your investment than you could ever achieve alone.
However, a pension is not always the best choice. The key factor is the conversion rate used by your pension fund (the government dictates the minimum conversion rate). This rate is given as a percentage, and the annual pension which pension funds pay out must equal that percentage of your pension fund savings. For example, if the conversion rate is 2.5% and you have 300,000 francs of pension fund savings, the pension fund must pay you an annual pension of 7500 francs until your death.
If you are 100% sure that you can achieve a higher annual return on your capital through a secure investment than you could receive through your pension, you may be better off cashing out and investing your money in other investment vehicles.
There are other scenarios where cashing out may be a good option. For example, if you suffer from poor health (cancer or a weak heart, for example) and do not expect to live long after retirement, cashing out your pension fund savings allows you to enjoy your money while you are still alive.
Survirors insurance and inheritance of pension fund assets varies between pension funds and is often very limited. If you want to give or leave a large amount of money to a beneficiary, cashing out your money may be the only way to insure that it reaches the person or entity which you want to benefit.
Best regards from Moneyguru
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