Key information at a glance
Before you begin planning the withdrawal of your retirement assets, you should be aware of the following:
- You must always close all your retirement savings accounts.
- You must actively request the closure from your bank or insurer.
- You may begin withdrawing your pillar 3a retirement assets five years before the regular retirement age.
- Capital withdrawals are taxed separately from your regular income and assets at a lower rate (capital withdrawal tax).
- Tax rates and provisions vary from canton to canton. Consequently, the options for making withdrawals are also different.
How to minimize your tax burden
Staggered withdrawal of capital from the third pillar
If you have contributed to multiple pillar 3a accounts over the years, you will benefit from withdrawing these funds on a staggered basis. By closing accounts over several years, you can avoid the effects of progressive taxation.
Samuel is 65 years old, lives in Zurich and will retire at the statutory retirement age in 2023. Over previous decades, he has saved CHF 250,000 in retirement assets, distributed across five separate accounts. He withdraws the full amount at once. Consequently, he must pay CHF 14,932 in capital withdrawal tax to the Confederation, canton and commune.
Lea is 59 years old, lives in Zurich and will also retire in 2023. She also has retirement assets of CHF 250,000 separated across five accounts. She intends to close one account every five years. In 2023, she will pay taxes of CHF 2,269 on CHF 50,000. In total, she will pay CHF 11,345 in taxes over the next five years. That is CHF 3,587 less than Samuel.
Good to know: It can, therefore, be beneficial to begin withdrawals before the OASI retirement age, especially in the case of married couples, as they are currently taxed jointly.
Coordinate withdrawals with pension funds
It is not only married couple's retirement assets that are jointly counted for tax purposes, money from your occupational pension fund and from vested benefit accounts are also taken into account for tax calculations. If you withdraw money from the second pillar and pillar 3a in the same year, you will pay more as a result of progressive taxation.
Under certain circumstances, you may also withdraw capital from your occupational pension fund on a staggered basis, if you consider partial retirement. This is especially beneficial for large sums. Inquire with the pension fund of your employer to see if they allow partial retirement.
Our recommendation: Where possible, we recommend that you begin withdrawing your retirement assets at the age of 60 and distribute the withdrawals over many years, in order to avoid progressive taxation. In order to optimize your tax burden, you should not withdraw money from your occupational pension fund and your pillar 3a capital at the same time.
Would a change of residence be beneficial?
When it comes to capital withdrawal tax, there can be very significant differences between cantons and communes. For large sums in excess of a million, the difference can be as much as double. For this reason, many upcoming pensioners consider relocating to another commune.
Our recommendation: Do not simply choose your new place of residence on the basis of tax law considerations. You should take care to determine the property and rental prices and the amount payable for health insurance premiums in the new location. Aside from this, we advise that you do not move home for purely financial reasons, but based on your own personal motivations. What will your situation look like in the new location? Do you have friends or family living nearby?