How a decision in your 20s can add 1 million CHF to your retirement

Photo by Fabian Blank on Unsplash

I talk a lot about the need for everybody that is a working individual in Switzerland to fully pay into the tax-advantaged 3a pillar account. In 2020, the maximum permissible amount to be paid in is 6’826 CHF.

And the tax benefit can be somewhere between 900 – 2’300 CHF depending on your situation (married couple with two kids and yearly taxable income of 100’000 CHF) and the canton you live in.

This should be a no brainer! If you do not have a 3a pillar yet, please –  PLEASE do yourself and your financial household a favor and get one now. 

Traditional vs. ETF 3a pillar

I really should not be a question of “Do I need a 3a pillar account or not?”, but rather, “What kind of 3a pillar account should I get?”

Should you get a traditional fixed interest bearing account, or should you consider a more risky approach of investing with ETFs (there are other 3a pillar options such as insurance models – I’m not going to cover those here.)

Let’s to some math

In order to figure out what the impact is of such a fundamental strategic-choice could have, we are going to have to do some math. 🤓


  1. If you opt for a traditional account, then you will get somewhere between 0 and 0.4% fixed and guaranteed every year until you retire. (see List)
  2. A 45% stock / 55% bond account (that’s what I had until recently) will increase your risk but also significantly increase your upside potential.
  3. Finally a 100% stock ETF account has the highest upside potential but also the highest risk.

For simplicity’s sake let’s make some assumptions :

  • We are paying in the full contribution from age 20 to 65 so 45 years
  • The yearly legal maximum contribution stays the same: 6’826 CHF
  • We assume the following average return rates over the whole period
    • Interest 1%
    • Bonds 2.5%
    • Stock market 6%

Average returns taken from Blackrock Investment Institute; Capital market assumptions for Switzerland over 25 years. (Source:

Scenario 1

Scenario 2

Scenario 3


As you can see there is a huge difference between the scenarios. If you are thinking about changing your strategy, these numbers might help you decide your risk profile. I understand that not everybody has the same risk tolerance, but I find it important to show two extreme examples and an “in-between” option to make an educated choice.

The fact is, especially in central/western Europe we are in an extremely low interest environment. The banks will not give you more than half a percent on your money. Some might even start charging private individuals negative interest.

Think how a small strategic decision at the beginning of your life can have a huge impact for your retirement. Deciding to diversify a little bit and opting for a 45% stock exposure with 55% bond (scenario 2) can be a difference of 617’000 CHF!

To be even more outrageous: if you decide in your 20s to switch your 3a pillar to a 100% stock account might just add 1’150’000 CHF to your retirement fund!


Let it be said, that just because scenario 3 has the highest upside potential, it is also the riskiest choice of the above. Past performance of stock or bonds are no guarantee of future outcome. Risk is not for everyone! If you can’t sleep at night due to your choice, then you should probably not do it.

Give me some feedback

Was this post helpful/meaningful or just a waste of time? Please let me know in the comments or send me a message directly. 

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