Retirement: These are your options

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In June 2021, Parliament decided to raise the retirement age for women to 65, bringing it into line with men's. Reason enough to briefly present Switzerland's four retirement options.

Retirement is a milestone in your professional life and should be planned for in advance and comprehensively. In addition to retirement upon reaching the regular retirement age, you also have the option of early retirement or deferred retirement. Staggered partial retirement is also possible. Each of these models has not only personal but also financial and tax implications.

Ordinary retirement

You can take ordinary retirement as soon as you reach AHV age. For men, this is the case, as before, when they reach the age of 65. In June 2021, Parliament approved an increase in the retirement age for women by one year.

The employment relationship does not end automatically when you reach retirement age. If you wish to take ordinary retirement, you must terminate the employment relationship or draw up a contractual agreement. You, or your employer, must notify the OASI compensation funds of your intention to receive an OASI pension three to six months before you retire. The total pension in 2021 is a minimum of 1,195 and a maximum of 2,390 francs. Married couples together may not draw more than 150 percent of the maximum pension for single persons. Currently, this is a maximum of 3,585 francs per month.

Advantages of ordinary retirement

Secure planning
Low administrative effort
No reductions in pension
apart from possible previous gaps

Disadvantages of ordinary retirement

Less free time until reaching the regular retirement age
No acclimatization period due to a reduction in workload

Tip: possible AHV gaps can be closed by subsequent payments five years back, provided you were insured in Switzerland.

Early retirement

Retiring before 65 sounds tempting, but it entails pension reductions. You can have your AHV pension paid out a maximum of two years before you reach the official retirement age. However, this leads to a lifelong pension reduction. Currently, this amounts to 6.8% per year of early withdrawal.

Advantages of early retirement

More time for family, friends, travel, and hobbies.

Disadvantages of early retirement

Pension reduction of currently 6.8% per early withdrawal year.
You must continue to pay AHV contributions until you reach the regular AHV retirement age.
Less time is paid into the pension fund. The retirement assets in the pension fund are lower as a result
The pension fund assets are offset with a lower conversion rate. Here, a reduction of approx. 8% per year of the early withdrawal is calculated.

Partial retirement

Partial retirement enables a staggered withdrawal from working life. With partial retirement, you can reduce your workload from the age of 58. You can gradually plan and implement the reduction - many pension funds also allow a gradual withdrawal of retirement assets. Partial withdrawal is not possible with the AHV.

Advantages of partial retirement

Smooth transition to retirement
More free time
A partial income is still available
You continue to pay into the pension fund
Voluntary purchases into the second pillar may be possible
Advance withdrawal of the AHV pension by up to two years is possible

Disadvantages of partial retirement

Partial withdrawal of the AHV pension is not possible. If an AHV pension is withdrawn early, it will be reduced by 6.8% per year of early withdrawal (maximum 13.6%).
Because the workload is lower, the pension fund contributions are also lower.
Benefits (pension or lump sum) must be drawn from the pension fund to the extent of partial retirement.

Partial retirement is possible up to the age of 70. This means that a partial retirement is also an option for people who wish to continue working part-time after reaching the statutory retirement age.

Deferred retirement

If you would like to continue working full-time after reaching the regular retirement age, you can do so with deferred retirement. You can defer drawing your OASI pension for a minimum of one and a maximum of five years and forgo your pension during these years. You must declare the AHV pension deferral no later than one year after reaching the regular retirement age with a deferral declaration. Deferred retirement is particularly worthwhile for high earners. With the pension deferral, you can avoid a higher tax burden due to the double withdrawal of income and pension.

Advantages of deferred retirement

Percentage AHV pension supplement, which is based on the deferral period of retirement. In 2021, this is a supplement of 5.2% for a deferral of one year and 31.5% for five years. With the maximum pension of CHF 2,390, this would be a maximum supplement of CHF 747 per month.
Depending on the pension fund regulations, contributions may continue to be paid into the pension fund. The retirement assets increase as a result.
The pension fund balance is offset with a higher conversion rate.

Disadvantages of deferred retirement

Longer working life and therefore less free time.
You remain liable for AHV during deferred retirement. However, the AHV contributions paid during this time do not increase the pension, and the ALV obligation does not apply. However, there is an allowance of CHF 1,400 per month / CHF 16,800 per year.

Plan your retirement early

Whichever path you choose, it is essential to plan early and comprehensively. Contact us for this purpose. Our tax team will be happy to analyze your financial situation and, tailored to your individual needs, show you the various options for your retirement, including the respective tax consequences.

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