Early retirement: How to retire early
Finally more time for family, hobbies and travel: Many working people in Switzerland dream of retiring early. But early retirement has long-term financial implications. What do you need to consider and what’s the best way to prepare? Read this blog post to find out.
What does early retirement mean?
Early retirement is defined as when someone stops working before reaching the OASI reference age and draws retirement benefits instead. This can be tempting, but it has far-reaching financial consequences. Therefore, such a step should be carefully considered and calculated. Early planning with comprehensive advice is crucial if you are to successfully meet the challenges of early retirement.
When is early retirement possible?
In general, early retirement is possible at any age. However, the date on which retirement benefits from the individual social insurances (Pillars 1, 2 and 3) can be drawn varies.
Early retirement in Pillar 1 (OASI): The regular retirement age for old-age and survivors’ insurance is 65, although there is currently a transitional rule for women (see blue info box below). An advance withdrawal of the OASI pension is possible from age 63, i.e. a maximum of 2 years before the reference age.
Early retirement in Pillar 2 (pension fund): Occupational benefits insurance also provides for retirement from age 65. As with OASI, advance withdrawal of the pension is possible from the age of 63. However, many pension funds also allow early retirement from age 58 – depending on the pension fund regulations.
Early retirement in Pillar 3 (bank or insurance company):
- Pillar 3a: Restricted pension capital can be withdrawn at the earliest 5 years before the regular retirement age, i.e. from age 60.
- Pillar 3b: With flexible pensions, there are basically no legal restrictions on the timing of disbursement.
For Pillar 3 insurance solutions, individual contractual provisions regarding the term and any replacements must always be observed.
How much does early retirement cost?
How much your early retirement costs depends on your personal situation – and when you retire in particular. Depending on when you take early retirement, this will have a different impact on your retirement benefits from Pillars 1 and 2.
Income gap
Your regular income ceases when your employment ends. Instead, you will receive reduced benefits from OASI and your pension fund – but only from a certain age (see section “When is early retirement possible?”).
If you retire earlier than your planned early retirement, you are not yet entitled to benefits from the OASI or pension fund. This creates a significant income gap. You should plan in good time to bridge this income gap with your own financial resources or alternative solutions so that your living expenses are covered at all times.
OASI 21: Standardization of the retirement age between men and women
The OASI 21 reform came into effect in 2024. The retirement age or reference age for women will be gradually increased by three months per year from January 1, 2025. From 2028, a uniform age of 65 will apply to both men and women. Women in the transitional age group (born 1961-1969) are entitled to a pension supplement.
Pension reduction
OASI: Early retirement results in a permanent pension reduction of 6.8% per year. So if you retire two years earlier, you will receive a 13.6% reduction in your pension for the rest of your life. An extract from the compensation fund will give you an overview of your projected pension. Please note: Even those who are not gainfully employed must continue to pay the minimum OASI contribution until the reference age of 65.
Pension fund: Benefits are calculated individually and depend on the amount of retirement assets you have saved. If you stop working earlier, you will pay less into your pension and your capital will therefore be smaller. On the other hand, the conversion rate will be reduced due to the longer pension withdrawal period. The combination of these two factors results in a reduced monthly pension.
How do I finance early retirement?
If you retire early, you will have to prepare for income gaps and reduced pensions. The decisive factor is to match future financial requirements with retirement benefits and available funds. A personal consultation can help you develop the right strategy. Basically, there are a number of ways to cushion financial losses.
Long-term financing options
- Avoid missing contribution years: Missing OASI contribution years result in reduced retirement benefits. You should therefore order an account statement from OASI and check whether you still have any missing contribution years that can be paid back. This is possible within 5 years. Make sure that you continue to pay the OASI minimum contribution without interruption up to the regular retirement age of 65.
- Invest capital profitably: Even with small amounts and a little basic knowledge, you can take your first steps into the world of investing. Read our investing guide for beginners to learn how to invest your capital profitably and purposefully.
- Use private pension provision: Pillar 3 is an excellent way to save up for retirement. Pillar 3a is particularly attractive because the statutory maximum amount can be fully deducted from taxable income.
Voluntary purchase of pension fund benefits
Check whether you have the option to purchase pension fund benefits for previous years. By purchasing benefits, you increase your retirement assets and hence your future pension benefits.
Depending on the pension fund’s regulations, there is also the option of buying in specifically for early retirement – thereby significantly reducing pension reductions.
Partial retirement as a flexible transition
Early retirement sounds tempting to many. But not everyone who has this dream can afford it. One possible alternative is partial retirement.
In the case of partial retirement, your working hours are simply reduced, meaning that you continue to receive part of your income and at the same time a part of the pension or pension capital. This allows you to gradually retire with reduced financial losses – an attractive alternative if early retirement is too expensive for you. Other benefits include: You continue to pay contributions into OASI and the pension fund, and it is also possible to continue Pillar 3a.
Insurance: What do I need to bear in mind if I retire early?
- Accident insurance: After retirement, you can extend your existing accident coverage by up to six months with interim accident insurance. After that, you will no longer have accident insurance and will have to get accident coverage from your health insurer.
- Life insurance: With early retirement, the terms and conditions sometimes change. Check the contractual conditions and seek advice if necessary.
FAQ about early retirement
Can I still pay into Pillar 3a if I retire early?
Yes and no. You can only pay into Pillar 3a if you continue in paid employment for which OASI contributions are payable (partial retirement).
How much money do you get in early retirement?
This depends on your individual pension situation. OASI pensions are reduced by 6.8% per year in the event of an advance withdrawal. In the pension fund, the amount of the pension is based on the capital you have saved and the conversion rate that applies on retirement. Individual advice helps to identify income gaps at an early stage.
Written by:
Nadine Graf
Nadine Graf is a theme manager and writes texts for AXA on topics related to insurance and beyond.
