What should I do with the inherited money?
Invest, amortize or make provisions: money expert Martin Player explains why an investment in your own provision pays off in multiple ways.
Published today at 06:00—
Fewer risks and tax advantages: If you have gaps in your old-age provision, you should pay into the PF and the third pillar.
Illustration: Christina Baeriswyl
I’m thinking about what to do with my deceased husband’s 3a money. We have three children together and live in our own house. Which variant would be advantageous for my situation: a partial repayment of our mortgage, further financing of my 3a pension accounts, a staggered purchase into my pension fund – I work part-time – or an investment in securities? Since I already own stocks, I tend to invest the money elsewhere. What do you think of my gut feeling? Reader question from FS
I wouldn’t invest the money in other stocks either. Not because the stock markets have collapsed or because stock investments are less attractive. Rather, I would refrain from doing so because on the one hand you already own shares and on the other hand you should strengthen your retirement provision. Since you work part-time, you almost certainly have gaps in your pension fund that you could close with voluntary purchases.
This step would have the plus point that you can improve your retirement provision and save taxes. You may deduct the voluntary payments into the pension fund in your tax return. You would pay even less tax if you made the voluntary purchases in stages. Then you could make tax deductions in several years. However, a voluntary purchase into the pension fund is only recommended if it is financially robust and has a coverage ratio of more than 100 percent.
In addition, I would pay the maximum amount of CHF 6,883 this year into the pillar 3a accounts and invest this money in retirement funds so that you can generate a decent return on them. For this I would use a smartphone solution such as Frankly, Viac or Finpension, which have significantly lower fees for securities savings in Pillar 3a than other traditional providers. You can also deduct these deposits from your taxes.
By making full use of pillar 3a for deposits, you would effectively be making an indirect amortization of the mortgage.
You should also carefully examine the future financing of your house: Here it is important to clarify to what extent the affordability of external financing of your house has deteriorated due to the death of your husband and how the rising interest rates will affect your budget. After the interest rate turnaround initiated by the Swiss National Bank, mortgage interest rates should continue to trend upwards. Depending on which mortgage model you have, you could soon be faced with a higher interest burden on the house. That’s why I would preventively look at the financing situation of the house. At best, the bank will demand a reduction in the mortgage because affordability has changed. Whether partial amortization makes sense must be assessed on the basis of your overall situation. It is worth talking openly to your bank about this and also having your pension situation analyzed.
By making full use of pillar 3a for deposits, you would effectively be making an indirect amortization of the mortgage. In addition, the envisaged staggered, voluntary payments into the pension fund will give you more security for your own old age. In addition, the money in the pension fund is invested professionally and the risk of later sitting on high book losses is far lower.