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  • You may choose to retire early due to an excessive workload, a lack of free time or for health reasons.
  • Plan your retirement carefully and in good time.
  • The financial losses from early retirement always depend on the individual case.
  • Partial retirement offers an alternative to early retirement by gradually reducing your working hours.
  • To the conclusion.
An elderly couple next to each other at a table are smiling as they look into the distance.

Reasons for early retirement

If you retire before the regular retirement age, you are considered to have retired early. The reasons for retiring early include the wish for more time for family, hobbies or volunteer work. Studies show that many Swiss people would like to retire early. However, there are also involuntary reasons for early retirement.

Plan your retirement at an early stage

When you think about your retirement, you are faced with some important decisions. Let’s draw up a plan together based on your personal wishes, so that nothing stands in the way of a relaxed financial future.

Early retirement in Switzerland: here’s how

Legally, early retirement is possible from the age of 58 with the pension fund. However, you can only start receiving your OASI pension at the earliest at age 63, two years before the reference age. Under OASI 21, women of the transitional generation can start receiving their OASI pension as early as age 62.

  • Register for your possible OASI pension a few months in advance with the relevant compensation office.
  • You may be able to claim benefits from your pension fund early from the age of 58. Find out the exact timing in your pension fund’s regulations.
  • You can apply for payments from pillar 3a based on age starting at age 60. Here, too, you should look at the contracts you have concluded with banks or insurance companies.
  • By making staggered withdrawalsÌýfrom your pension fund and pillar 3a, your tax burden can potentially be reduced.
  • After the OASI reform, special regulations apply to women born between 1961 and 1969. They will be the first cohort to be affected by the gradual increase in the retirement age for women from 64 to 65 years.

Budget planning for early retirement with OASI, pension fund and pillar 3

Early retirement has financial consequences. Plan early on to avoid pension shortfalls. For each year that you withdraw early from the OASI, you will lose 6.8% of your pension until the end of your life. Even if you retire early, you will still have to pay OASI contributions. The benefits from pillar 2 are lower because the accumulated capital and interest are reduced. Expect a reduction of 7–8% in pension fund benefits. Your costs may remain high, even if you cut back. You should take this into account when you plan your retirement.

Do I have a pension gap?

If the benefits from pillars 1 and 2 are not enough to maintain your desired standard of living in retirement, you’ll need to save more. Find out how much today.

How you can close gaps in your income

Use existing assets to bridge income gaps. If you own land, a house or an apartment, you can sell or rent out this property. An additional mortgage is also possible, but it should be taken out before retirement, as financing conditions may change. A tailored financing concept with up to five pillar 3a solutions can also help.

The graph shows the gap that arises between your earned income and your pension income when you retire early.
Source: ÃÛ¶¹ÊÓƵ

Financing from pillars 2 and 3

Flexible and tax-privileged pension plans in pillars 2 and 3 can help you reduce your income losses.

There are two options in pillar 2:

You can make additional contributions to your pension fund to increase your future benefits. Many funds allow this until shortly before retirement. The pension fund statement provides information about the amount of possible contributions. Additional contributions can be deducted from taxable income but should be spread over several years. No capital withdrawals are allowed in the following three years after a buy-in.

Some pension funds offer bridging pensions, which are financed from your capital or additional contributions. This solution is interesting if your employer participates.

Pillar 3a can close income gaps in the event of early retirement. An early withdrawal is possible up to five years before the regular retirement age. From this point on, only withdrawal due to age is permitted, and a partial withdrawal is no longer possible. With two or more 3a accounts, you can stagger the withdrawalsÌýthereby flexibly reducing your financial gaps and saving on taxes. Calculate your tax burden with the pillar 3a tax calculator.

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How much will early retirement cost?

Using a concrete example of a single man with a net salary of CHF 90,000, we can see what early retirement at the age of 64 would cost him. Our rough calculation takes into account the lower OASI contributions and income taxes due to retiring early. As a result of the one-year earlier withdrawal, the OASI and pension fund benefits are reduced. In summary, the result is:

Loss up to regular retirement age:

  • around CHF 30,000.

Lifetime loss from 65 years of age (total):

  • more than CHF 90,000.

The losses from early retirement can be significant. The specific impact early retirement will have depends on the individual case. You can ask the OASI and the pension fund about what you can expect.

Here are some tips for the calculation:

  • Calculate possible reductions of pillar 1 benefits if early withdrawal from OASI is possible.
  • When it comes to pillar 2, you can find out when the earliest possible time is for you to claim benefits in your pension fund’s regulations. Plan options to bridge the shortfall. Perhaps a lump-sum payment instead of a pension might be an option?
  • Identify opportunities to save on your living expenses and reduce your costs at the end of your working life.

Alternative to early retirement: the advantages of partial retirement in a nutshell

If early retirement is not possible as the financial losses would be too big, an alternative is available: partial retirement or working fewer hours without accessing your pension fund benefits.

  • A gradual reduction in your working hoursÌýcan result in a seamless transition into retirement. Ask your employer if you can reduce your working hours. From a tax perspective, this is possible in 20% stages.
  • If you wish to withdraw capital from the pension fund, you can stagger these withdrawals over a maximum of three years through partial retirement and potentially also save on taxes.
  • You can supplement your reduced income by withdrawing some of your retirement benefits from the pension fund.
  • At the same time, your financial burden decreases as you do not pay additional OASI contributions in the case of partial retirement. The obligation to pay contributions can often be fulfilled by working part time, provided you are employed for more than 50% of normal working hours.

Conclusion

Early retirement is often driven by the desire to find ways and means to achieve new life goals. This is understandable, but these goals must also be affordable. Early retirement often leads to an income shortfall.

You should therefore clarify your exact plans and financial possibilities early on. With professional support, you can also find new ways and means of ensuring your financial security. Through careful budget planning, you can ensure that your personal retirement journey begins happily.

Good to know

Disclaimer

This publication is for personal information purposes only within Switzerland and is not to be understood as a recommendation, offer or solicitation of an offer for investment or other specific products and services. It is not intended to form investment, legal or tax advice and should not be used as the basis for financial decisions. Before making a decision, you should obtain professional advice.
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