3rd pillar vs Global Dividend grower strategy

[Djoff]

Hello everyone,

Certainly a stupid question but it doesn't matter, I accept it.

I live in Switzerland and will start investing in dividends for the long term.
I don't have a 3rd pillar and am navigating my early forties.

Knowing that the technical rates of the 3rd pillar will soon drop from 1.2% to 0.75%, is it worth investing in a 3rd pillar or would it not be better for me to keep this money to improve my investment capacity in a stock portfolio such as Global Dividen Growers?

Thanks in advance for your advice.

Djoff

[Jerome]

The 3rd pillar is obviously a crappy return since it is managed by a bank or an insurance company, so management fees and investment in assets that don't bring in much.
The only advantage is that you can deduct the amount invested from your taxable income from a tax point of view.
So if you can afford it, do both, growing dividends for income and capital appreciation, 3rd pillar for taxes.

[Mystic]

Since I am in life insurance, I can answer you without further ado 🙂

I advise you to put part of your budget into a life insurance linked to funds. Ideally in the form of 3a to save taxes. This way, you benefit from the average purchase price, because you will have an investment period of more than 10 years. The advantage is that you are sure to have at least an insured capital at the end. If the stock market has risen, you receive more than the insured capital. If the stock market has crashed, you receive the insured amount. For this purpose, I can make you a free offer without obligation. Just contact me by PM.

Besides that, you can put the other part of your budget in an investment of your choice. Just don't forget that you take the full risk of the stock market prices. So much the better if it goes up, but it's annoying if it goes down. An unpredictable event can always happen (September 11, Lehmann Brothers crash, etc.), but that's the game of the stock market.

I therefore advise you to put part of it into life insurance and another into a stock market product of your choice in order to combine security and flexibility.

[Djoff]

Thank you for your answers.

The only thing that interests me in the 3rd pillar is the "guaranteed" capital in case of a problem in life or death (for my children because in this case I should not need too many pesetas).

I'm only moderately interested in tax breaks because you still have to open your wallet to get the assets. If that's the only advantage, I'd better not invest, because in the end I'd have even more money in my account: everything I wouldn't have invested to get these tax breaks. I don't know if I'm clear with these explanations...
Basically, to get something like 2000CHF tax reduction, you have to give up 6500 (I may be wrong in the amounts). The balance is therefore against 4500 - and for a very low profitability as you say so well.

So, if I put aside the life insurance aspect (if we only look at profitability), wouldn't it be better to invest this money in something that we hope will be more profitable?

[Mystic]

So if you want a guaranteed capital in case of a problem in life or death, you need risk insurance. That is to say an annuity to cover the loss of salary (in case of disability) with a capital in case of death. Contact me by PM if you want concrete figures.

For tax deductions, don't mix everything up:
– 3a with guaranteed capital at the end of the contract + in the event of death: at most you pay 6768 per year with a tax reduction of roughly 2,000 CHF. The balance of CHF 4,500 is not lost, since the amount is invested in particular in the savings part (which would be invested in funds, for example). When the capital is withdrawn, the amount is taxed at a preferential rate.
– life insurance risk: in Fribourg, you can also deduct the 3b premiums at the cantonal level. But given your canton of residence, there is not much difference between a 3a and 3b, given the amount of the premium.

For my part, I won't hide from you, I took out risk insurance (annuity + death) and the balance, I invest in the stock market over the very long term in order to have capital when I retire.

[Author]

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