Sunday, December 21, 2008

The Swiss Retirement Scheme

This morning, I read an article in the New York Times about how some U.S. employers are temporarily suspending their employee 401(k) matching to cope with the awful economy.

Fortunately, in Switzerland, employer matchings are required by law, as are employee contributions.

There are three components to the Swiss retirement scheme, and they're known as the Three Pillars.

Pillar 1: State pension. This is basically Swiss social security. 5.05% is taken out of every paycheck and employers match to make it 10.1%. Contributions are required by law. This is paid out when you retire or (in my case) when you leave the country for good.

Pillar 2: Employer pension. This is more like a company pension fund. Contributions range from 7 to 18% and increase with age. I get this when I retire in Switzerland or when I leave the country.

Pillar 3: Private pension. Contributions are voluntary. Sort of like owning your own mutual funds and life insurance. Tax deductible, and receivable when I leave the country.

So the three pillars cover state, employer, and individual. Pretty comprehensive. I'd love to hear what any of you finance geniuses think about this.

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