Planning early for your retirement is the best investment you can make in your future. The aim is to ensure that you can maintain your accustomed standard of living once you stop working, and enjoy your retirement with peace of mind.
To ensure that you can do what you want after reaching retirement age, you need to cover your financial requirements over the longer term. If you would like to retire early, you should consider the financial impact of this decision well in advance.
1. Know your financial needs in retirement
If you know what you currently spend, you can also estimate what you will need in retirement. You should expect to spend around 80% to 100% of your current expenditure once you have retired.
Will your expenditure change significantly upon retiring? Would you like to invest more in your hobbies?
If you’d like to calculate your exact financial needs after you stop working, we would be happy to help you.
2. Pension or lump sum
The AHV provides you with a monthly pension from the time you reach normal retirement age until the end of your life. In the case of your pension fund, however, you can decide whether to take a lifetime pension, a one-off lump sum, or a mix of the two. You can find information on your options in your pension fund regulations.
Pension fund retirement pension
- Guarantee: the pension is guaranteed until the end of your life.
- Security: you will have regular, constant retirement income.
- Protection: your surviving spouse – and in some cases your children too – will continue to receive a regular pension.
- Tax: the pension must be taxed as income.
- Survivor's pension: in the case of your death, your surviving spouse will generally only receive 60% of the pension.
- Inflation: your retirement pension does not have to be adjusted in line with ongoing inflation.
- Investment: you can dispose of this lump sum freely and invest it as you wish.
- Tax: the lump-sum payment is taxed at a reduced rate.
- Flexibility: you can decide during your lifetime how the capital left to your heirs on your death will be used.
- Investment risk: fluctuations in your assets and income must be expected.
- Tax: the capital and income generated on it must be taxed as assets/income.
- Time horizon: the capital could be used up before you reach the end of your life.
Combination pension and lump sum
If you are not 100% sure which withdrawal option to choose, you can take advantage of the benefits of both, and combine security and flexibility in line with your individual needs.
You can benefit by coordinating the lump-sum payment from pillar 2 with possible payments from pillar 3. By making staggered withdrawals you can lower your tax bill. We would be happy to help you find the best way to combine your pillar 2 and pillar 3 benefits.
3. Consider early retirement
If you would like to retire early, you should begin your retirement planning in good time. Early retirement will affect your pension benefits:
Your AHV pension on early retirement
Your AHV pension can be withdrawn up to two years prior to the normal AHV retirement age. For each year of early withdrawal, however, your individual pension will be cut by 6.8%, which in turn reduces your income in old age. The obligation to make AHV contributions remains in place until you reach 64 or 65 years of age.
Pension fund withdrawal on early retirement
The earliest possible time you can make a withdrawal is set out in your pension fund regulations. Your benefits will be reduced by around 7% to 8% for each year of early withdrawal. If you plan early, you have the option to make up for any missing contributions through voluntary payments into your pension fund.
If you reduce your working hours by taking partial early retirement, you can withdraw the pension fund capital on a staggered basis and save tax in the process.
4. Delay your retirement
If you work beyond the normal AHV retirement age, you benefit from a percentage increase in your pension. If your income exceeds
CHF 16,800 per year, however, you must continue to make AHV contributions.
You may only make payments into your pillar 2 pension scheme up to age 70. Thanks to the higher volume of retirement assets and higher conversion rate, you will benefit from higher benefits when you draw your pension later.
Payments into pillar 3a and the deferment of withdrawals are possible for up to five years after the normal AHV retirement age – provided you are working.
We would be happy to help you to plan your retirement.