when d goes to 0 it gives you the derivative of Tax(x) at the point N and it can be finite.

Like acceleration is derivative of speed over time (how much does speed change over time), the marginal tax tells you how much tax changes over monetary unit (for example: 1000 CHF more).

I vaguely remember this, I mean if you graph Tax(x) then the first derivative is the adjacent tangent at point N. Which like the acceleration is just the rate of change. Was just thrown off by the limit.

Anyway I think we're digressing here, time to dust off some of this old knowledge.

in other terms Mr The_Love_Doctor, marginal tax rate is to tax rate what passion is to love: a derivative telling about the *intensity* of the function.

ha ha, now you're speaking my language

It's just the notation that threw me off and having not used / applied this for a long time (read ever) it's easy to see why. Wiki page explains it quite well...

I guess if we both with my wife open pillar 3a, we can both use account to fund property purchase?
I guess after signing 3a pillar contract, there is no obligation to make payments every year?

- yes
-yes (unless it's used as amortisation of a mortgage).

But on the other hand, at least for the canton of Zurich you can see this number quite easily. Just look at the numbers at "für je weitere 100."
For your commune you have to multiply the cantonal tax by (1 + Steuerfuss/100) + add the part from the Bundessteuer.

You can also do the same for the Quellensteuer. But to compare both in one graph you must have a conversion from gross income to net income - deductions.

Here the tax table:
https://www.steueramt.zh.ch/internet...ndessteuer.pdf

Here the Steuerfüsse:
https://www.steueramt.zh.ch/internet...uerfuesse.html

Here the tax at source rate:
https://www.steueramt.zh.ch/internet...de/tarife.html

__________________
On Strike - ChatGPT knows more than I, so use it (or doesn't it?)

Wait! Stop! Contract? What are you doing? Stop it!

Contract looks like you are going for the insurance option. DO NOT DO THAT! Unless you fully understand the consequences!!

A simple pillar 3a account with a bank has no obligations in respect of payments. The only catch are the withdrawal restrictions set out by the law. But still read the fine print. Some will charge you a fee of around CHF 200 if you intend to transfer the savings to an other institution. Notable banks with such a fee is for ex. the Corner Bank.

Depends on how you buying it and Güterstand status in your marriage. If you buy.to co-own, no problem. If the property would be 100% your (husbands) property and you have a Gütertrennung (separation of wealth) I don't see why your wife's bank would release her account's funds to finance your property.

It is with bank. It is not a insurance. Seems there is no contract to open 3a'rd pillar account. I just sent the request and in couple of days it should be opened.

I'm trying to calculate this but coming to weird conclusions - I can't be doing this right.

On a salary of say 150k, and paying the max for myself and my wife, thats 6768 x 2 = 13536 into pillar 3.

According to online calculators my tax savings is nearly 5000.

In 2 years I've deposited ~27000 into pillar 3 and got back 10K in tax returns (or tax savings, however you want to look at it)?

So in terms of wanting to invest in a property somewhere (not switzerland), I could either scrounge for 2 years and have 27k saved up, or I can use pillar 3 to turn that into 37K minus the 7% tax = 34K for a mortgage?

That bonus 7K over just 2 years seems like a "too good to be true" situation. What am I missing?

You have to actually live in the property into which you're going to pour pillar 3a savings, so it cannot be a foreign property. Or leave Switzerland for good - then you can do whatever you want with that money.

If you actually intend to buy a property in short/mid team (or leave Switzerland), then it's a very good idea and it does work like that.

But the longer you wait with buying, the worse it becomes. Once you've paid, you have your 30% tax savings immediately and can reinvest them, but your principal is going to be locked away at ridiculously low rates or in ridiculously expensive funds until you buy something or leave Switzerland.

That's a bummer, since buying here is impossible and I don't want to leave. I'm looking for a good way to invest money but it looks like my 2 preferred options (buying my primary home & buying to rent) are both out.

It's still tempting for the tax return but as you say, it's then locked away at miserable returns until I retire.

If you live here and from EU or have a C permit, you can buy whatever you want, as long as you have the money and the seller is willing to sell for it. Even non-EU are allowed to buy, but only a apartment/house for themselves.

If you're far from retirement and don't want to own your own house, forget about tax savings on pillar 3a then - they'll be totally eaten by pillar 3a underperfomance. Pay the tax, buy some stocks and you'll be much better off in the long run. For example, assuming that stocks would return a modest 5% p.a. on average, their growth would compensate the tax already in 5-6 years.

I was referring mainly to the requirement on 20% down, which for a decent home/apt for my family, without me having to have a huge commute, is around 300K. Even for a dump or something over an hour away it'd be 200K. That's just literally impossible to save up. That's why I was thinking of buying somewhere abroad and renting it out, so at least I'd have something I can console myself with while crying myself to sleep every time I pay the rent.

And even aside from that, I don't feel very optimistic in the future of the housing market here (Geneva).

I'd really love to own my own home but it looks like the only way to do it is moving to France but although that makes quite some financial sense, it has other downsides that I'm not very keen on.

I'm getting off topic - but you're right, it seems like investing cautiously in stocks/bonds might be the better choice.

Well, it depends of course on your family size and how much space you need, and I don't know much about specifics of GE market, but in ZH, a 300k downpayment (i.e. 1.5M price), is enough to buy a whole free-standing single-family house near the city! And there's enough of decent apartment offers under 1M for something like 10-12k Fr/m^2.

Also don't forget about pillar 2 - you can use its funds for up to half of the 20% downpayment, and it's also a much better use of the cash in it than letting it rot away at <1% rates till retirement.

Great theory but it very rarely works out that way. In most cases the person who invests in the state saving scheme and invests the tax saving element of it will beat the crap out of you! It is not about the rate of return nor stock picking ability, it is about lack of access to the cash! If you have access to the cash and you have a long time horizon there will always be a good reason to access the cash.

Some time ago AAII was prompted to do a survey of it's members after it was reported that the average baby boomer couple reaching retirement today has a total net worth of less that 2OK! One of the main problems they found was that people rarely fully rolled over their pension on changing employers. Instead money was diverted to good causes with the intention of putting it back. But it did not happen. It is very hard not to touch the money when it could solve some of your problems: house repairs, auto repairs, extra education and so on.

__________________
"There is no passion to be found playing small - in settling for a life that is less than the one you are capable of living." - Nelson Mandela

It's about the same here in GVA, but let me put it this way: for the price I pay in rent, I could afford a mortgage like you mention easily. But having to save up the 20% first WHILE paying these rents effectively means it's impossible. It'd take me as long to save up for the down payment as to pay all the rest off!

I know I can use my pension as part of that down payment but even that doesn't help much - it'd still take 10+ years - and I also question how wise it is to risk a pension into this housing market.

Hmm, if you struggle to pay even rent for an equivalent property, I wouldn't be so sure if you can really afford to own it in the bankers' sense. Banks have strict affordability requirements these days, exactly to prevent the property bubbles. They assume a hypothetical mortgage rate of 4-5% p.a. + 1% for maintenance - this has to be not more than a third of your income. So, for a 1.5M property with 20% downpayment, you (together with your wife perhaps) need to be earning around 1.5M*(80%*5%+1%)*3/12 = 18750 per month. I take it you make far less than that, as otherwise saving some 300k over a few years with that income wouldn't be an issue. Scale down your price range in accordance with your income.

To me, owning your own house in a place where you decided to settle is a no-brainer. You'll need a place to live all your life. And the land on which it's built is an appreciating asset in general. Assuming continued low interest rates and no bubble, it actually offers pretty good returns currently. Certainly better than 1% interest that your pillar 2 or 3a fund can offer you.

Yes, there's always a background risk of property price collapses, but why would it matter for your home that you don't intend to sell in a foreseeable future? In the long run even after a bubble it'll probably still be worth more. Plus the risk today is less than it used to be with the introduction of measures like affordability requirements I mentioned above.

Well, that's just a psychological problem, not a fundamental financial one. All the more profit opportunities for those who can do a cold calculation and keep emotions away from intervening.

I also tend to think swiss and germans are much more savings-oriented than americans in your study and so less susceptible to living beyond their means.

Here's my calculation. Our combined income is around 11k, and rent is somewhat over 3k. That's leaves a lot of money left over on paper but this is switzerland, and reality is I am able to save maybe 1.5K a month on average.

A very modest apartment in the ugly and enormous apartment blocks of Avanchet, 3 bedrooms, 100 sq m, costs a million. Going a bit further out like Satigny, you can find decent apartments starting around 1.2m. Both pretty huge drops in our living standards and neither is a place I'd be excited to call my own, permanent home. But let's go with satigny - so 240K down payment. Even if I saved 2K a month that's 10 years. During which time I'll have wasted nearly 400K on rent!

I do fully understand that giving loans over 80% is nutty in this market (though I would argue that infinite interest-only loans, and putting your pension as hostage, are even more nutty, but the banks seem happy with that). But I guess what I don't really understand why you can't get a 100% loan if you can provide solid collateral for the 20% (not saying it would be wise for me necessarily, but for the bank it should be fine, no?).

I fully agree on this and it is what I want, but:

Yes in the long term, but until you've paid off a big chunk of the mortgage, it can matter very much because of 1) risk of margin call 2) risk of income drop. Which comes down to how much confidence you have in the housing and job markets. In Geneva, in both cases, at the moment it's not looking so great. Fortunately (?) as I am nowhere close to having a loan this isn't something I need to worry about at the moment