Retirement planning: the top ten tips

The calculation is very complex. The maximum individual pension amounts to CHF 2,450 per month or CHF 29,400 per year. You can expect to receive this amount if you have an average annual salary of CHF 88,200 for the entire contribution period of 44 years for men or 43–44 years for women (depending on your year of birth), taking account of the revaluation factor and any parenting and care credits.

From the age of 40, you can ask your OASI compensation office every five years to calculate your predicted pension free of charge.

In general, Swiss people have the largest portion of their assets in their pension fund. Depending on the pension fund, you need to decide up to three years before retiring how you wish to draw your assets: as a lifelong pension, a one-off lump sum or a combination of both options.

This decision is final and will affect your quality of life after retirement. It is therefore important that you carefully weigh up the opportunities and risks that the withdrawal options present. A pension is secure for life. A lump-sum withdrawal is usually preferable from a tax perspective and allows for financial flexibility. A combination often makes sense. For example, one spouse can draw a lump sum and the other spouse a pension.

Compile a budget plan and determine your expected expenditure and income after retirement. These figures will form the basis for your plan, which will show how your expenditure, income and assets will develop before and after you retire. You’ll thus see whether you’ll have a secure income in later years or whether you’ll need to accumulate additional savings that you can use up gradually to close your income gap.

If you draw your retirement assets as a lump sum, you need to invest them wisely. Many people who draw a lump sum make several mistakes: they take on too much risk, select investment products without understanding them, hectically reallocate their investments due to short-term fluctuations in the stock markets, and pay excessive fees. All these errors have a negative influence on returns and may lead to assets being used up more quickly than planned.

To ensure that your income is secure in the long term, you need a solid investment strategy, just like the strategies that pension funds follow. Pension funds have been among the most successful investors for years. If you’d like to benefit from their experience, select VZ’s OPA-focused asset management mandate.

If you optimise your taxes, you could save tens of thousands of Swiss francs. We recommend that you start your tax planning at least 10 to 15 years before you intend to stop your gainful employment. That way, you can take advantage of all optimisation options. Example: If you draw assets from your occupational and pillar 3a pensions, you’ll be subject to payout tax. To calculate your payout tax, your tax authority adds up all your withdrawals within a calendar year. In most cantons, this includes withdrawals made by your spouse.

The higher the withdrawal amounts, the higher the tax rate. We therefore recommend distributing your withdrawals from your pension fund, vested benefits and pillar 3a over several years. If you opt for partial retirement, you can even draw your pension fund assets in tranches and thus save even more payout tax.

Bear in mind that repaying your mortgage increases the amount of tax you need to pay, as you can deduct less debt interest. Don’t repay so much that your reserves are insufficient to cover unforeseen costs. Pensioners who wish to top up their mortgages again are often turned down because they don’t meet banks’ affordability criteria.

As people age, their expectations of their homes change. Their house can become uncomfortably large if their partner dies or their children move out. Stairs turn into an obstacle as you grow older, and tending to the garden becomes too much work. Hence, many homeowners between the age of 60 and 70 want to exchange their house for an apartment.

This step needs to be prepared carefully, as the transition is tricky. If the timing of the sale and the purchase don’t match, transferring the mortgage to the new property can pose a huge problem. If homeowners wish to purchase an apartment in addition to their house, the bank may refuse to fund it due to the double financial burden.

Many people want to stop working early. Partial retirement is less expensive than early retirement. Your pension will be reduced by a much smaller amount if you remain employed part-time, as you’ll continue to accumulate pension capital. Additionally, you won’t have to pay the OASI contributions required of non-gainfully employed persons, as your reduced income will generally cover your OASI obligations. Additionally, you’ll remain covered against the risks of death and disability until you retire permanently.

Phased retirement is also beneficial from a tax perspective, as you can generally draw your pension assets in a phased manner too. For example, if you reduce your working hours from 100 to 70 percent, many pension funds will allow you to draw 30 percent of your pension fund assets or a pro rata pension.

A pillar 3a bank account yields almost no interest. This means that there’s no compound interest effect, so your savings won’t grow by much more than your annual payment. A pillar 3a solution with securities is therefore a better choice. It involves accepting more risk in the short term, but in the long term you usually achieve higher returns than with a bank account.

A particularly advantageous approach is to opt for passive securities solutions that invest in index funds, such as ETFs. Thanks alone to the lower fees, your assets on retirement can be thousands or tens of thousands of francs higher than with a 3a solution dependent on investment funds that are actively managed and therefore expensive.

If you die without leaving any instructions about who should inherit your estate, it will be divided up according to statutory regulations. The result is often not what the deceased intended. For example, the deceased’s cohabiting partner will be left empty-handed.

However, the surviving spouse may also end up in difficulties if he or she is not given the maximum benefit. Under certain circumstances, the spouse may have to sell the marital home to reduce fixed costs or to pay offspring their share of the inheritance. To prevent this, the best solution is a marriage contract, a will, an inheritance contract or a combination of these, depending on the situation. Estate planning is particularly important if you have your pension fund capital paid out as a lump sum.