Early retirement doesn’t have to remain a dream– but you need to plan early.

More time for family, traveling or to fulfill a long-held dream. Many people want to retire early, but it’s a step that needs careful planning.

When it comes to their retirement savings – whether in the AHV, the occupational pension (BVG) or pillar 3a private pension – women are at a disadvantage compared to men because they are more likely to work part-time, take career breaks, earn less, and live longer. All of these factors must be considered when thinking about early retirement.

Read here about your options for early retirement and early pension withdrawal as a woman before you reach statutory retirement age and what important questions you should ask yourself when planning for it.

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1. The right time to retire early: when is it?

The answer depends on various factors, such as your life situation, personal wellbeing, but also on certain general conditions such as the regulations of your pension fund, how much you can expect to receive from your AHV pension, and other financial aspects. When will be the right time for you to retire? How crucial is the size of your pension to your financial security in retirement? How do you feel in your current job, and when would you like to start new private projects? When can you withdraw capital from which pillar?

In Switzerland, all three pension pillars offer both men and women the option of a flexible retirement age and flexible pension withdrawal. But the age limits differ. The following regulations apply to the respective pillars: 

From a financial point of view, there are several aspects that you should consider. Did you know that the highest retirement fund contributions are typically generated over the last ten years of your working life? Or that the pension you’ll receive in retirement is reduced for every year you make an early AHV withdrawal?

You should take these and similar factors into account in your planning.

2. Semiretirement: a good alternative?

Semi-retirement can be a sensible option. It enables you to get used to retirement gradually and to reduce the financial burden by not drawing a retirement pension immediately and continuing to pay into the AHV.

Gradual withdrawal from the world of work, perhaps by starting to work part-time – which will free up more time for family and private projects – is worth considering and should also be discussed with your employer. Another advantage is fewer financial penalties regarding the capital saved in pension funds. In addition, working part-time means you’ll still be paying your mandatory AHV contributions.

3. How you can benefit from voluntary contributions to a pension fund

If you want to increase your occupational pension, voluntary contributions can be an attractive option for you, as they allow you to make up for missing years of contributions due to early retirement – or maternity or parental leave. Here, too, you should consider the concrete possibilities of your pension fund, as there are differences.

What makes voluntary contributions to the pension fund very popular is the potential for tax savings because your contributions can be deducted from taxable income in your tax return.

For many Swiss, voluntary contributions to a pension fund – especially staggered over a period of years – are a popular way of saving on taxes. Read more about the benefits of making staggered pension fund contributions in this article.

4. How to stagger your payout sensibly

You also need to think about how you want to organize the early withdrawal of your pillar 2 and pillar 3 retirement savings. This will affect both how you bridge possible income shortfalls if you take early retirement, and how much you pay in taxes.

The Swiss pension system allows women to stop working at the age of 64. Making the retirement age the same for both men and women (65) is part of the planned AHV reform that is subject to a federal referendum in September 2022. In most cases, those who retire early have to accept both a shortfall in income and a reduced pension until they reach statutory retirement age. The income gap will be particularly high if your employer is not helping to finance early retirement.

Tax-efficient private retirement savings with pillar 3a can help to cushion the impact of the income gap. You should consider opening several pillar 3a accounts so that you can withdraw from them over a period of years. This has a number of advantages. Until pillar 3a funds are withdrawn, neither income nor wealth taxes are paid on the capital paid in, and contributions can be deducted directly from taxable income. The funds are also paid out separately from other income, usually at a reduced tax rate.

If the balance has been split between several 3a accounts, you can withdraw from the funds in stages over several years, thus reducing tax progression in an individual year. For the same reason, you should try not to withdraw 3a funds in the same year as pension fund balances. However, balances on pillar 3a accounts are subject to legal regulations and cannot be withdrawn earlier than five years before official retirement age. The only exceptions are the use of capital for pillar 2 contributions, the acquisition of residential property or a definitive move abroad. you’ll also need to check whether exceptions apply in your canton.

Read more about your options for providing for your retirement and saving on taxes at the same time on this page.

5. How to find hidden costs

Calculate carefully from the start and include every aspect in your planning. Remember, for example, that even if you do retire early, you’ll still have to pay AHV contributions until you reach official retirement age. In principle, all those who are resident or employed in Switzerland are obliged to pay AHV contributions up to statutory retirement age; the AHV pension will otherwise be reduced proportionately.

If you retire early, you still have to pay AHV contributions until you reach statutory retirement age. If you continue to work after this age, you'll also need to pay AHV contributions, even if you’re already receiving an AHV pension.

Plan your retirement today

How long will your assets last for after retirement and how high will your pension be? Don’t wait until shortly before retirement to answer these questions. Especially if you want to take early retirement. The UBS Retirement Calculator They can help you with your planning. Options such as semi-retirement or reduced hours are a good compromise and should also be weighed up carefully. Our UBS pension experts will be happy to help you plan your early retirement.

Covid-19 – how will it influence my early retirement as a salaried employee?

  • Will the level of my insured salary be reduced during this period of shorter hours?
    No, your contributions are insured at the same salary level, which means that the reduced hours won’t lead to an additional gap.
  • What happens if my employer forces me to retire early?
    You can choose between redundancy and early retirement. With redundancy, you can register as unemployed and have your vested benefits transferred to up to two pension funds. If you take early retirement, you’ll receive your retirement benefits either as a pension and/or as capital (depending on the regulations). As a rule of thumb, your lifelong pension will be reduced by around 8% for every year of early retirement.
  • Do voluntary contributions still make sense?
    A poor stock market situation will reduce the pension fund’s coverage ratio. This can lead to restructuring measures, which is why any voluntary contributions should be considered very carefully.

How will Covid-19 affect me as a woman entrepreneur?

  • For an independent entrepreneur, the decline in sales will lead to a (heavy) fall in annual profits this year. A much lower income could reduce the level of pillar 3a contributions if you don’t belong to a pension fund, leading to lower future retirement capital. If these pillar 3a contributions were invested in funds, they will also have lost value.
  • For female owners of an AG/GmbH (Ltd/PLC) there is hardly any change to occupational pension provision. During the period of shorter working hours, the insured salary in the pension fund is as high as before. On the other hand, no dividend may be paid this year if a Covid-19 loan has been applied for, which in turn reduces personal liquidity.
  • If the company is about to be sold, the sale could fall through or the agreed price will need to be renegotiated.

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