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Comment by foverzar | Hacker News Reader

> You will still get the state pension

What exactly would fund it then? Pensions system typically works by current generation providing for the previous. If we allow newer generations to "cash out", what would be the source of funding?

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The pension system in Estonia consists of a shared fund "First Pillar" and an individual specific fund "Second Pillar". Part of your salary goes into the pension system and gets split between these two funds.

So the current workforce is helping to keep up the First pillar for the current pensioners. But at the same time the current workforce is making deposits into the Second Pillar which just invests their money into the markets.

So people can liquidate their Second Pillar without messing up the First Pillar for everyone else.

You fund a bit to the state pension and a bit to a private pension. Based on a previous comment Estonia allowed you to cash out the private pension. I assume. Romania has something similar where you pay for your state pension, mandatory level 1 private pension, and optionally a level 2/3 private pension. State + level 1 private pensions work as you'd expect, whereas level2/3 generally have cash-out terms. It's not either/or, if you want a level 3 private pension you need to contribute to both level 1&2.

edit: replace level with pillar, as I couldn't think of the word and saw it used by sibling comment after posting.

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