Early retirement: how to make your dream come true

 Couple dancing in the kitchen

Early retirement: how to make your dream come true

Road 66 instead of traffic jam at Gubrist, New York Marathon instead of marathon meetings, hiking in the mountains instead of mountains of paperwork: during dreary days at work, many dream of retiring a few years before the OASI retirement age / statutory reference age. But is early retirement even financially viable?
Below you will find the most important questions and answers on this topic – find out everything you need to know about early retirement in Switzerland.

What is the current regular retirement age?

In 2023, the regular retirement age is 64 for women and 65 for men. This means that both the OASI pension and the benefits from your occupational pension fund will only be paid out after your 64th or 65th birthday. Following the OASI reform of 25 September 2022, the regular retirement age for women is expected to gradually increase to 65 starting from 2025.

When can I start drawing my pension?

The OASI pension, i.e. benefits from the first pillar, can be drawn at the earliest two years before regular retirement. As soon as the OASI reform comes into effect, it will be possible to draw a portion of your pension (between 20% and 80%) early and defer the rest. 

With the second pillar, your occupational pension fund, you have the option of taking out your pension benefits as a lump sum, as an annuity or a combination of both.

Many pension funds already offer the option of partial retirement. For example, those who reduce their working hours from 100% to 60% at the age of 63 can then draw 40% of their annuity or pension capital. Under the OASI reform, all pension funds are obliged to facilitate this form of partial retirement.

Depending on the terms of your pension fund, you can often draw the benefits from your pension as early as 58 or 60. However, the consequence of this is that the pension capital / annuities paid out will be permanently lower than in the case of ordinary retirement. This is because the pension capital that you have saved will be correspondingly smaller. 

Currently, you may draw funds from pillar 3a five years before regular retirement age, i.e. at age 59 for women and 60 for men at the earliest.

When should I begin planning?

As a rule, you should begin thinking about the topic of early retirement as early as possible, but no later than from the age of 50. Start thinking about the question of when you want to retire as soon as possible. Because early retirement is costly: first, you have to bridge the gap financially between early retirement and the time you begin receiving your OASI pension. Second, the final years of contributions have a significant influence on pension fund capital thanks to the accrued interest on your total assets, and you will have to reckon with noticeable losses. Finally, you will no longer be receiving your earnings from gainful employment. 

Tip: the pension certificate issued by your pension fund illustrates how much the amount of your occupational retirement pension will vary depending on the date of your retirement. This will provide you with an initial, rough overview.

How much money will I need in retirement?

This varies from person to person and depends on many factors: do you own your own home? Are you expecting to pay for training or further education for your children? Are you planing any big trips? On average, you can expect to receive about 60% of your previous salary when you enter into regular retirement based on the first and second pillars – however, most people need about 80% of their previous salary. This is why it's important to make private provisions for your retirement, for example, using the third pillar. 

What will early retirement cost me?

Early retirement is expensive: as a rule of thumb, each additional year of retirement prior to regular retirement age costs about one year's salary. This is because, first, you must compensate for your loss of earnings, and second, you are already drawing benefits from your pension fund, which will consequently be lower than in the case of regular retirement for the remainder of your life. Conversely, the OASI pension is usually only paid out after you have reached regular retirement age, so you must also bridge the costs incurred by this gap. You will also have to pay OASI contributions for non-employed persons – unless your spouse's income is still subject to OASI contributions. In addition, your tax situation will change, perhaps also your living situation. All these factors have an impact on your income. 

The exact costs of early retirement can only be determined in the course of financial or pension planning. You can reach an approximate figure by multiplying the net annual salary on your salary statement by the number of years before the regular retirement age that you plan to retire.

Do I have the option of offsetting the reduction in my pension fund capital by making a lump-sum contribution?

You can partially or fully compensate for reductions to your pension fund capital as a result of early retirement by making voluntary payments. You can find the amount of money necessary to offset this deficit on your pension fund statement. Please note: it is important to take the legal and tax-related framework conditions into account here – be sure to obtain reputable advice before taking any action.

If early retirement is too costly, could partial retirement be an alternative?

Yes, partial retirement can be an interesting alternative to early retirement. First, partial retirement does not see your income reduce as drastically as early retirement. Aside from this, partial retirement can be a good opportunity to transition out of working life gradually and smoothly.

Depending on the regulations of your pension fund, partial retirement with a corresponding reduction in workload may be permitted from the age of 58 onwards. Your level of employment will be reduced by a minimum of 20% of full-time working hours. You have the option of incrementally reducing the hours you work over a maximum of three stages.

I would like to retire early, what do I need to do?

Begin planning as soon as possible. You should start laying the groundwork for your retirement when you reach the age of 50 at the latest. It is prudent to seek the support of a specialist here: In the course of creating a financial plan, you will develop an overview of your future income and financial situation, determine your budget for living costs after retirement together with your financial advisor, and define methods for closing any potential income gaps.

On our retirement planning page, you will find a roadmap for your path into retirement, in addition to plenty of useful tips.

What is financial or retirement planning?

A financial or retirement plan is a life plan: 

building up assets is the central component of financial planning. Financial planning benefits those who want to achieve their goals, organize their assets and save in a targeted manner in order to prepare for the third phase of their lives. It creates clarity, while offering you a foundation for making prudent and well-informed decisions about your financial future. 

Our specialists will develop a suitable concept for you on the basis of your needs and goals as a client– in other words, a plan to optimize your financial situation gradually. 

In concrete terms, pension planning is about laying the groundwork for your retirement: you optimize the process of building up your assets, consciously decide the age at which you wish to retire and develop a sensible strategy for the use of your assets. You allocate your money during retirement in a way that enables you to cover your needs comfortably until the end of your life. 

What are the benefits of pension planning from Zurich?

At Zurich, you benefit from comprehensive advice on every aspect of your retirement needs. As an insurance provider, we offer not only expertise in financial matters, but also competent advice on your risk situation, including protection for your home, and financial security in the event of disability or death.

At the same time, we can offer you a broad range of investment solutions: Zurich Invest Ltd manages the Group's real-estate fund and is responsible for the largest bank-independent investment foundation in Switzerland. It works together with renowned investment managers from around the globe. Pension funds, institutional clients and private clients all invest with us using the same investment vehicles. As a private investor, you will invest in the same way as the big players and, consequently, will benefit from the economies of scale. 

We would be glad to advise you

A personal consultation is often worthwhile, because our solutions are as individual as your personal circumstances. At Zurich, it's up to you: your customer advisor will advise you at your home, at the agency or via video conference - whatever suits you best.

Request a consultation

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