BVG interest or capital withdrawal?

The choice between a lifelong pension and a capital withdrawal from retirement savings is often not an easy decision. It is a trade-off between security and flexibility, risk and stability. Each of these options offers unique advantages and potential disadvantages that should be carefully considered.

Advantages and Disadvantages of a BVG Pension

Advantages:

·        Security: The monthly pension provides a constant and guaranteed source of income during retirement. There is the certainty of a          lifelong regular income that ensures financial stability.

·        Survivor Protection: In the event of the pension recipient's death, the spouse receives a widow's or widower's pension, and children in education can          receive a child pension.

·        Simplicity: The pension option is straightforward and does not require special financial or investment knowledge, as the pension fund manages the retirement capital.

Disadvantages:

·        Dependence on the Conversion Rate: The amount of the lifelong pension is highly dependent on the conversion rate of the pension fund and the amount of accumulated          retirement savings.

·        Inflation and Taxes: Over the years, the purchasing power of the pension decreases due to inflation. Moreover, the pension is taxed as income at 100 percent.

·        Loss of Capital in Case of Early Death: In the event of an early death of the pension recipient, the remaining capital goes to the pension fund and not to the heirs.

Advantages and Disadvantages of Capital Withdrawal

Advantages:

·        Flexibility: With a capital withdrawal, one enjoys full flexibility and can use the money according to personal wishes, whether for investments, repayment of          debts, or fulfilling personal needs.

·        Asset Transfer: The remaining capital after death goes entirely to the heirs.

·        Tax Benefits: The retirement capital is generally taxed at a reduced tax rate, allowing for long-term tax savings.

Disadvantages:

·        Self-Insured Risks: With private investments, one bears the risks oneself, and the amount of income depends on the investment strategy and the returns          achieved.

·        Uncertainty About Capital Duration: There is uncertainty about how many years the accumulated capital needs to last, and a miscalculation of          returns can lead to problems.

·        Required Financial and Investment Knowledge: It requires a willingness to take risks, planning, and knowledge about investments or solid investment advice.

The choice between pension and capital withdrawal depends on individual needs, risk tolerance, and financial goals. Ultimately, it is important to carefully examine personal circumstances and preferences in order to find the optimal solution for oneself.