Retirement planning
Semi-retirement: often the happy medium
Want to retire early? Semi-retirement is often the answer. Unlike the AHV, many pension funds have good solutions for this.
Content:
Content:
- Partial retirement is a gradual transition into retirement.
- The reduction in working hours in part-time work is possible at the earliest at the age of 58.
- A phased retirement often leads to financial losses, as you draw benefits in advance, your income is lower and you may have to shorten your savings period.
- A good alternative is the workload reduction as you do not draw on your pension capital.
- To the conclusion
Early retirement sounds tempting to many. But not everyone who has this dream can afford it financially. Partial retirement is a possible alternative. It’s best to start your financial planning early. The 50th birthday is a fitting milestone in many respects.
With a partial retirement you reduce your workload and your income. So your working life does not end abruptly, but you move into retirement stage by stage. By withdrawing benefits from your pension fund and from the OASI, you protect yourself financially.
How is your retirement provision?
The free UBS Pension Check gives you a reliable overview of your current financial situation. Based on the results, you can optimize or increase your private retirement savings.
When is a partial retirement possible?
When is a partial retirement possible?
With the OASI, you can draw your pension up to two years before the reference age. Since the beginning of 2024, you also have the option of a partial pension of between 20 and 80 percent of the old-age pension.
The prerequisite for partial retirement is always that your employer agrees to the reduced working hours.
You can also take partial retirement with pension funds from the age of 63 at the latest. Many people can do this earlier, as a rule is possible between the ages of 58 and 70. You will find detailed information on this on your pension fund statement, which your insurance company usually sends you at the beginning of the year.
Pillar 3a, in turn, allows you to withdraw your pension capital up to five years before the reference age, although partial withdrawals (e.g. for home ownership) are no longer possible from this point onwards.
Worth knowing
The prerequisite for partial retirement is always that your employer agrees to the reduced working hours. Another condition is that you permanently and significantly reduce your employment and salary. “Permanent” means: Partial retirement cannot be reversed undone. Once you have reduced your workload, you are not allowed to increase it again, at least not with the same employer. “Significant”, in turn, means that you have both reduced by at least 20 percent.
The possibilities of partial retirement in detail
The possibilities of partial retirement in detail
If you are considering partial retirement, you should carefully analyze the individual pillars of your retirement provision. Because when you reduce your working hours and income, you can at best use the strengths of the individual pillars in such a way that you continue to have a stable income and draw a pension – while working less.
The conversion rate is the key used to convert the savings capital into a pension.
If you decide to take a pension and a lump-sum, you should check which step makes more sense at the given time: a pension or a lump-sum. The most important factor here is the conversion rate of your pension fund – this is the key used to convert the savings capital into a pension. It changes over the course of time. However, when the pension is paid out, this amount generally remains fixed for the insured person, regardless of how the conversion rate changes. If it is more likely to fall in the future, the pension could be the right choice. However, because the conversion rate increases with age, it may also be advisable to take the pension at the last stage.
Private provision from the 3rd pillar
You can withdraw benefits from the 3rd pillar at the earliest five years before reaching the reference age. Conversely, you can defer drawing your 3a benefits for up to five years beyond the reference age, but only if you remain in gainful employment. So if you continue to work beyond the age of 65 and earn an income subject to OASI contributions, tax-saving amounts must still be paid into the 3rd pillar.
The maximum annual contribution you can pay into pillar 3a is CHF 7056 (as at 2024) if you make pension fund contributions. If you do not pay into the pension fund, the maximum amount is CHF 35,280 per year (as at 2024) or up to 20 percent of your net earned income.
If you draw 3a benefits in advance, you cover any possible loss of income that may have arisen due to early partial retirement. Ideally, you should have your 3a pension capital spread over several investment opportunities. This allows you to draw your benefits in stages between the ages of 60 and 65 and thus save a lot of money due to the different tax years save.
Plan your retirement at an early stage
When you think about your retirement, you are faced with some important decisions. Let’s draw up a plan together based on your personal wishes, so that nothing stands in the way of a relaxed financial future.
The consequences and effects of partial retirement
The consequences and effects of partial retirement
As a pensioner, your income will be significantly reduced: The benefits from the 1st and 2nd pillar pension plans secure on average 60 percent of the last income. If you decide to take partial retirement, the gap between your current income and your retirement pension will probably be significantly larger because you will draw benefits early and, in case of doubt, make fewer provisions.
If you withdraw your OASI pension early, you must expect your pension to fall by 0.6% per month of early withdrawal. Because the early withdrawal is possible two years before the reference age, your entitlement can therefore be reduced by a maximum of 13.6%. Separate provisions apply to women of the transitional generation.
Your pension fund pension is reduced because you draw benefits before the normal retirement age. In addition, your lower earned income after the reduction in working hours means that your potential savings and pension provision in the 2nd pillar will decrease. The 3rd pillar is also affected if you are not affiliated to a pension fund. If you add the lost compound interest effect on this potential credit, your pension provision can be significantly reduced.
Worth knowing
Unlike than with early retirement, with partial retirement you claim benefits step by step. At the same time, you can continue to build up pension capital until you finally retire because you only gradually reduce your professional activity.
Because partial retirement depends on many individual parameters, it is essential that you plan the steps and prepare them carefully. This is the only way to find the best time to draw your pension from the respective pension pillars or calculate the best possible amount of financial reduction. If you clarify the income gap before and after retirement in advance, you will be able to gradually retire from your job without any negative surprises.
Measures to close the gap
You can compensate for income gaps in several ways. This means that you can withdraw capital or a pension from the pension fund in advance to the same extent as you reduce your workload. This is how you close the current income gap.
However, because this will reduce your future old-age pension, you can make voluntary contributions into the 2nd pillar in advance. The amount that you may pay in until the start of your partial retirement is noted on your pension fund statement. With a voluntary purchase into your pension fund, you can stabilize your retirement income in the long term. Please note that no lump-sum withdrawal is possible for three years after a purchase into the pension fund.
Another option for closing future financial gaps is to make private pension provision as part of the 3rd pillar: By making a tax-saving voluntary investment in a pension account or a pension custody account, you can build up additional capital for your old age – and close any gaps left by your partial retirement in the 1st and 2nd pillars.
Advantages of partial retirement
Advantages of partial retirement
Gradual retirement is a good opportunity for many people to retire slowly and in a planned manner from their working life. You enjoy gradually more free time, while workload and stress become less. This can have a beneficial effect on health.
Partial retirement can also pay off financially. You benefit from the financial security of a partial pension and partial salary. At the same time, you continue to actively participate in working life and build up your pension provision.
In some cases, you may be earning a higher income than before you took your pension. Then you move up to a higher tax progression and have to pay more taxes.
You can react flexibly to such a case: If you defer your OASI pension, your later pension will increase. At the same time, pillar 3a offers opportunities to build up retirement assets while saving tax. You continue to pay into pillar 3a despite partial retirement and thus reduce your taxable income.
Tax advantages of partial retirement through lump-sum withdrawal
Partial retirement can bring further tax advantages: If you have your retirement assets from the pension fund paid out as a lump-sum, the tax rate may be lower than for your income tax. If you also spread the payout over several years, you will reduce your tax burden even further.
However, if you have your pension fund assets paid out as an annuity, this is simply added to your other income and taxed accordingly.
If you cannot afford to take partial retirement because the income gaps are too large or you do not want to draw on your retirement savings, then a reduction in your workload is an alternative. In doing so, you reduce your workload but deliberately refrain from drawing benefits from your retirement provision prematurely.
However, you will earn less if you reduce your workload, which is why your pension contributions will also be reduced. This means that your OASI pension entitlements and future retirement capital in the occupational pension scheme will be lower than if you had continued to work full-time.
But you can counteract this too: Under certain conditions, many pension funds offer to maintain your insured salary at the level prior to the reduction if you pay in additional contributions. As already mentioned above, a vesting period of 3 years must be observed if a lump-sum withdrawal is envisaged. You may also be able to top up your pillar 3a accordingly. This means that your income will decrease as a result of the reduction in your workload and you will also have to make additional voluntary contributions. However, your entitlement to full retirement benefits remains unchanged.
Retire earlier, have more time for yourself and still lose little in terms of salary and pension: Partial retirement offers you many opportunities to approach retirement according to your needs. However, there are many steps you need to take to maintain your standard of living into old age. For this reason, precise planning is important. Get an overview in good time of your needs, your options and the legal and tax conditions that will make it easier for you to retire today.
Disclaimer
Disclaimer
