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

The main points in a nutshell:

  • All three pillars of retirement provision (AHV, occupational pension and private pension) allow for a flexible retirement age and pension benefits.
  • In Switzerland, women's pensions are on average over 30 percent lower than men's. Early retirement can be financially challenging and requires careful planning.
  • Semi-retirement allows you to transition gradually into retirement while reducing the financial burden.

Finally spending more time with your family, going on a big trip or turning a long-held dream into reality: early retirement sounds and is tempting. However, you need to plan this step well, especially if you’re a woman, as when it comes to providing for retirement, women and men are not always on an equal footing. This is due to part-time work, breaks in employment, wage differences and the fact that women have a longer average life expectancy. All this needs to be considered when planning for early retirement. We’ll show you how – step by step.Head into retirement with peace of mind while reducing the financial burden.

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1. When is the right time for early retirement?

Above all, it’s good to know that in Switzerland all three pension pillars offer a flexible retirement age and flexible pension payments for both women and men. However, age limits differ. You should therefore be aware of the following regulations for each pillar:

Pillar 1: AHV

You can claim your AHV pension one or two full years before the statutory retirement age. Advance withdrawal for individual months is not possible. For women, this means they can take early AHV retirement from the age of 63. Note: if you take early AHV retirement, your pension will be reduced for the rest of your life (one year early: reduction by 6.8 percent; two years early: reduction by 13.6 percent).

Pillar 2: Occupational pension (BVG)

Under occupational pension schemes, early retirement is only possible from the age of 58 at the earliest, although some pension funds set a higher age limit. You can find this information in the regulations of your pension fund. Until you’re eligible to receive AHV benefits, you may have to bridge the gap with your private savings for several years.

Pillar 3: Private pension 3a

Early withdrawal from private pillar 3a is generally possible from five years before the statutory retirement age. If you have multiple pillar 3a accounts, you can close them in stages over different years and thus optimize your tax situation.

The right time for you to take early retirement naturally depends on many other factors. These include your individual circumstances and personal well-being, but also certain conditions such as the regulations of your pension fund or the amount of your expected AHV pension, as well as other financial considerations. It’s best to ask yourself:

  • When is the right time for me to transition from working life to retirement?
  • How important is the amount of my pension to my financial security in old age?
  • How do I feel in my current work environment, and when do I want to start new personal projects?
  • But also: when can I withdraw capital from which pillar?

2. How much does early retirement cost?

There is no blanket answer to the question of how much early retirement costs. It depends heavily on your individual situation.

The following factors have the greatest impact:

  • Loss of income: early retirement means a loss of regular income.
  • The AHV contribution requirement:even people who are not gainfully employed must pay AHV contributions until they reach the reference age. The amount of AHV contributions that must be paid depends on assets and pension income, but range from CHF 530 to CHF 26,000 per year. Important for married couples and registered partnerships: if one partner receives a salary subject to AHV contributions, the contribution the other partner taking early retirement is obliged to pay may be waived under certain circumstances.
  • Lower pension capital:your retirement capital will be reduced in three ways:
    • Fewer years contributing to the AHV and pension fund
    • Longer period receiving pension benefits
    • Permanent pension reduction due to early withdrawal

3. What challenges do women face in early retirement?

The retirement situation of many women in Switzerland is not ideal: on average, women's pensions are over 30 percent lower than men's. One reason is the fact that many women work part-time or are employed in lower-paying professions.Gaps in retirmenet provision can likewise arise from maternity breaks. Divorce can also significantly worsen the financial situation in retirement for women.

These factors mean that almost twice as many women as men in this country are affected by poverty in old age. In addition, about one in four women do not have a pension fund, which further complicates financial security in retirement.

These challenges make it difficult for many women toturn the dream of early retirement into reality.

But don’t be discouraged. Is it your wish to retire early? Then it’s important to get clarity about your individual pension situation at an early stage. Have your financial situation analyzed and plan specifically to make this dream come true. Below, we explain how you can make this happen.

4. Six tips: how to prepare effectively for early retirement

1. Start as early as possible:

Ideally, start planning your retirement pension when you’re still young and take all three pillars into account – AHV,your occupational pension and private retirement savings. We provide specific suggestions on how to strengthen each pillar in our article entitled “Optimal retirement planning: how to plan your retirement as a woman". If you want to fully engage with your retirement planning, sign up for our free “Retirement” learning path. Independently work your way through the five modules at your own pace and from anywhere. We explain Switzerland’s three-pillar system clearly and concisely and give you a concrete roadmap that you can use to optimize your retirement savings in all three pillars.

2. Maximize your occupational pension:

If you want to increase your occupational pension savings, contributing voluntarily to your pension fund may be an attractive option.This allows you to compensate for missing contribution years due to early retirement – or even maternity or parental leave. Here, too, you should check the specific options available with your pension fund, as there are differences.

Another argument in favor of making voluntary contributions to your pension fund are the potential tax savings. Pension fund purchases – especially when staggered – are a popular way to save taxes among many Swiss people. You can find out more here: “Pension planning: tips on saving taxes”

3. Use pillar 3a:

Increase your retirement savings using pillar 3a. Tax-privileged private pension provision with pillar 3a can help cushion the income gap. Read more in our article “Pillar 3a: two accounts are better than one”.

4. Consider a staggered payout:

As already mentioned, you can withdraw your pillar 3 assets in stages over several years. When you close a 3a account, you must withdraw all the assets in this account and pay tax on them. To avoid having to pay tax on your entire assets in pillar 3 at once and thus being placed in a higher tax bracket due to progressive taxation, you can open several pillar 3a accounts. To optimize your tax situation, it is also advisable not to withdraw your 3a funds in the same year as your pension fund assets.

5. Factor in all costs:

Calculate carefully from the very start and include all aspects in your planning: for example, despite taking early retirement, you will have to continue to pay AHV contributions until you reach the normal retirement age. In principle, anyone who lives, or is gainfully employed, in Switzerland is obliged to pay AHV contributions until they reach the standard retirement age. Those who retire early remain liable to pay contributions until the statutory retirement age. People who work beyond this age must also pay contributions, even if they’re already receiving an AHV pension.

6. As you approach retirement age, cut back on your fixed costs:

Normally, people don’t spend less in old age; on the contrary, many spend more after retirement than they did before. The reasons can include travel, expenses for leisure activities and an increase in healthcare costs.

Would you like to take early retirement, but know the move could be financially tight? Then reducing your fixed costs early is worthwhile. Ways to do this include looking for a more affordable place to live or optimizing your insurance costs.

5. Semi-retirement: a good alternative?

Semi-retirement can be a sensible alternative to early retirement. Working part-time allows you to gradually adjust to retirement. At the same time, you’re not exposed to the financial burden of early retirement as severely or as soon. Finally, with semi-retirement, you won’t immediately receive an old age pension and will continue paying into AHV. Consider discussing this option with your employer.

Start planning your retirement today

How long will your assets hold out after you retire? And how high will your pension be? Don’t wait until just before retirement to address these important questions – especially if you plan to retire early. The ۶Ƶ retirement calculator can help you get an initial overview. Our ۶Ƶ pension experts are happy to help you prepare a detailed plan.

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