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Step 2: When and How Do I Prepare Myself for Retirement?
Your retirement has to be carefully planned. This is the only
way to optimize your financial situation once you are no longer working.
A Long Planning Time Frame
By the age of 50 at the latest, you should be addressing the issue of retirement. One of the reasons for this is because your pension fund must be notified in good time of any intended lump-sum withdrawals. In addition, Pillar 3 retirement assets can be withdrawn as a lump-sum payment five years before the normal retirement age.
Tax Implications of Lump-Sum Withdrawals
Lump-sum withdrawals of pension fund assets and the dividends on retirement capital from Pillar 3 assets are taxed separately from other sources of income at a reduced rate (rate for pensions). Calculate the actual amount of the withdrawal from Pillar 2 (LPP) and Pillar 3a pension plans after taxes.
Adjusting the Risk Profile
The risk profile for investments depends on several factors, including the investment horizon. The closer your retirement, the more securely your assets should be invested. This is because securities that are affected by price fluctuations can have a negative impact on your retirement capital in the relatively short period remaining before your retirement.
Exploit the Possibilities for Optimization
- Payment in installments: As retirement assets are taxed when they are paid out, we recommend staggered withdrawal of various retirement assets over a period of several years. This allows you to benefit from a lower tax progression. By law, Pillar 2 capital can be withdrawn at the age of 58 at the earliest, while the minimum age for withdrawing Pillar 3 capital is 60 (this does not apply to the options relating to vested benefits and the promotion of home ownership).
- Purchase of additional pension benefits: By purchasing additional benefits from your pension fund, you can increase your future benefits and reduce your taxable income during the contribution years. The retirement capital accumulated in the pension fund and the income earned are tax-exempt until you become eligible for a pension.
- Investment of vested benefits: If you become self-employed, temporarily stop working or retire, your Pillar 2 vested benefits must be paid into a vested benefits account or safekeeping account. With a Credit Suisse vested benefits account you benefit from a preferential interest rate. Saving with Securities is another option. It offers higher potential returns and is ideally suited for building up your vested benefits.
We hope this has explained when and how you should start addressing the topic of retirement, as well as how you can optimize your pension situation more effectively. If you require further assistance, please do not hesitate to contact our client advisors. Contact us to arrange a non-binding consultation .
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