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Created on 10.05.2024

Pension planning: how to prepare for retirement

It’s important to plan your retirement carefully. The aim is to secure your assets, guarantee continual income and maintain the standard of living that you’re used to. We’ve put together the following checklist, providing answers to all your questions to help you achieve your goals.

Your retirement may seem a long way off, but then again, time flies. That’s why it’s crucial you not only dream about your retirement, but also start planning it properly. Ideally, it’s best to get started with retirement planning around 15 years before you intend to finish work. This allows you to prepare properly for retirement and to take any action or decisions needed.

We’ve summed up the key planning steps in a checklist so you can look forward to retirement worry-free. This overview makes retirement planning easier and ensures you don’t forget anything or miss any deadlines.

At 50 – assess your situation and get things on the right track

This is the ideal time to assess your situation and get things on the right track:

  • Decide when you’d like to stop working.
  • What’s your position in terms of assets and income? Write a detailed list of your assets and income. You’ll need to include your tax return, OASI projected pension calculation, life insurance policies, real estate, bank accounts, retirement assets under the second and third pillars, securities, shares and any inheritance, etc. Also set out any debts, such as mortgages, and the availability of your various assets.
  • Create a budget and check carefully whether your predicted retirement income will be enough to cover your outgoings.
  • Work out whether you have any pension shortfalls and define a strategy to make them up as quickly as possible. Retirement benefits from the first and second pillars generally cover only around 60 percent of previous income. There are various ways of making up any shortfalls – from saving with fixed or flexible retirement planning as part of the third pillar to purchasing additional pension fund benefits, retirement funds or life insurance policies through to restricting your personal standard of living. People who plan ahead, make provisions and put money aside have greater financial flexibility later on.

At 55 – review your goals

Review your own retirement targets regularly:

At 60 – set out the specific details

The perfect time to arrange and actually enter retirement:

  • Decide when and how you’d like to inform your employer about your retirement date.
  • Find out about lump-sum withdrawal options on your pension fund assets and the application deadline, and decide whether you’d prefer to withdraw your assets as a pension, capital or a combination of both. Carefully weigh up the benefits and drawbacks of drawing a pension compared to a lump-sum payout before reaching your decision. It’s also worth considering how you could stagger any lump-sum withdrawals from the second and third pillars to reduce your tax liability. Use PostFinance’s online calculator to work out exactly how much tax you’ll save.
  • Remember that this is often your last chance to purchase tax-privileged pension benefits, especially if you intend to have the amount paid out again upon entering retirement. Firstly, compare the return this contribution will generate compared with other investment options before making your decision. If you plan to have all or some of your pension assets paid out, it’s important to remember the three-year vesting period. Put simply, that means you can’t make any contributions during the three-year period before payout. Otherwise, you’d have to repay the tax savings made on the contributions. This provision doesn’t apply to pension benefits.
  • Consider your living situation – what about your accommodation? Do you plan to stay in your current accommodation or move into your own property after retirement? Decide whether you’d like to pay off all or some of your mortgage and adjust the term accordingly. If you’d like to move from your current accommodation into your own home, it’s best to arrange a mortgage at an early stage.
  • Decide when you’d like to withdraw your retirement assets from pillar 3a. By staggering the payout of capital over several years, you can save a few thousand francs. Progressive taxation applies to lump-sum payments from the third pillar. This means that the tax liability increases at a disproportionately high rate above a certain amount of capital. That’s why it’s wise to stagger the withdrawal of these assets. It’s worth opening another account in addition to your retirement savings account 3a for amounts over 50,000 francs. However, find out about the tax policy on capital withdrawal in the canton where you live.
  • Review your asset goals: will you have to use your assets carefully to ensure a secure income, or will you be able to keep them and pass them on to your heirs?
  • Think about how you’d like to ensure a secure income after retirement: for example, would it be wise to invest in a withdrawal or payout plan, or would it be better to invest the money yourself and use it based on your own plan?
  • Decide on your new investment strategy and set out a comprehensive financial plan. This should show the development of your expenditure, income and assets until retirement and beyond. Consult a trustworthy advisor to provide support on key decisions and defining a reliable financial plan.

1 year before retirement – secure your assets

The time has now come to secure your assets for retirement:

  • Optimize your asset allocation to guarantee long-term income security and adjust your investment strategy accordingly. If you’d prefer not to decide on your own investment strategy or manage your assets yourself, then consult a professional asset manager.
  • Plan the cancellation of your mortgage in good time if you intend to repay all or some of it upon retirement.
  • Make arrangements for your estate now: protect your loved ones by writing a will or contract of inheritance. Well thought-out inheritance planning is all the more important if you intend to have your pension fund assets paid out partly or in full. Depending on your circumstances, it may be advisable to appoint an executor in your will.

7 to 8 months before retirement – put your plan into action

Ensure your retirement is well organized:

  • You should register with the OASI office six months before retirement so that you receive your first pension benefits on time.
  • If you’d like to make a contribution to pillar 3a during the year of your retirement, do so before your retirement date.
  • Arrange the payout of future additional income, such as from your pension fund, private retirement planning solutions or savings capital.
  • Decide how you wish to invest assets you won’t initially need in retirement.

What are the key points to consider about early retirement?

If you’d like to retire before the regular pension age, it’s important to bear the following points in mind:

  • Check the earliest date when you can obtain your employee benefits and OASI pension. Ask the OASI office and your pension fund to calculate the estimated old-age pension benefits for your retirement date.
  • Check if your employer can provide financial support for early retirement – for example, by providing bridging pension benefits until you reach regular retirement age.
  • Think about whether anticipated withdrawal of the OASI pension, pension fund assets or bridging pension benefits might be worthwhile options for you. Consider alternative ways of overcoming financial constraints, such as early withdrawal of your pillar 3a assets.
  • After early retirement, you should register with your OASI office and pay OASI contributions for persons not in gainful employment. Every month for which you don’t pay OASI contributions can reduce your pension benefits. Find out about ways of reducing your OASI contributions, such as semi-retirement or part-time employment.
  • A partial pension is an attractive alternative to early retirement. This allows employees to step back from working life gradually by cutting their working hours, while still receiving part of their salary. Flexible working arrangements of this kind enable older employees to enjoy a smooth transition to retirement, and employers also benefit from continuity in the company.

More on this subject in the article What do I need to bear in mind if I retire early?

What do you need to consider after retirement?

Congratulations! You’ve reached retirement. You need to think about the following points to ensure you enjoy long-term security in your later years:

Keep track of your finances at all times. Check the implementation of your financial planning regularly to avoid any unforeseen financial constraints. Be prepared to adapt your plans if your life circumstances or legal regulations change.

More on this subject in our article: Investing after retirement: what you need to bear in mind.

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