Experience has shown that most people believe they do not need to plan their retirement budget. But the income from AHV and a pension fund are often not enough to maintain your accustomed standard of living after retirement. That’s why it is very important to carefully plan your retirement budget.
Calculate your income after retirement
The basis for a thorough budget is assessing income and expenses. Your income will be less after your retire. An AHV estimate, which you can order from your local AHV office, and your pension fund statement will provide you information about how much you can expect to receive for retirement.
Attention: Your costs for the following items, among others, could be higher when you retire:
- Health care costs
- Leisure time costs
- Renovation costs
- Special costs (AHV contributions in the case of early retirement, replacement purchases or gifts)
Special attention should be given to the expense item of taxes. Although one usually has a lower income after retirement than before, the tax bill can be nearly the same. This is usually due to the fact that deductions are no longer taken, such as for professional expenses or for deposits to a Pillar 3a account.
Taking stock of where you stand for retirement
If you can cover your future expenses through your pension and other sources of income, then you are on a good track for retirement. You can even consider early retirement or a withdrawal from your pension fund, which can be used to pay down a part of your mortgage or to give a gift to your children. If your budget planning indicates you might not have enough, you can use any other available assets (such as Pillar 3a, life insurance, other assets) to fill this retirement gap.