"For every year of early retirement, you need 18 months of your annual salary."
In Switzerland, awareness of the importance of private pension provision is visibly growing. This is an important trend, says Désirée von Michaelis, Head of Wealth Planning at Credit Suisse in an interview. What to take into consideration when planning your retirement – for example, for early retirement. Five tips from Credit Suisse for successful retirement.
Ms. von Michaelis, when do you recommend that people start thinking about and planning for their retirement?
It's worth starting early. We recommend that you start thinking about your retirement at least 15 years before you plan to retire and begin making financial arrangements. That way you still have relatively ample time to take action and build up a financial cushion for your later years.
What are the desires and the expectations that Swiss citizens have with regard to their retirement?
Early retirement is a topic that comes up in around 80% of retirement planning discussions. You can see quite clearly: many still have dreams for the time after retirement. But with decreasing pension fund conversion rates, it is becoming increasingly difficult to retire early. And this trend is on people's minds. Only 20% to 30% of today's 55-year-olds believe they can afford to retire early.
Do you need more or less money when you are retired?
That depends on the individual. The rule of thumb is that the cost of living decreases by around 10% to 20% when you retire. Some people were very disciplined throughout their working lives and can likewise make ends meet in their later years by living economically. But of course, others want to fulfill their retirement dreams. They want to travel, to experience new things. In that case, retirement can be significantly more expensive. Particularly since you will have a lot more time to spend money.
How much does it cost to retire early?
Roughly speaking, for every year you retire early, you will need to have put away the equivalent of 12 to 18 months of your annual salary.
And if you can't afford it?
Then partial retirement can be a good alternative, since it allows you to adjust your work-life balance before reaching retirement age. In 10% to 15% of our consultations, people end up preferring this partial-retirement plan. I am assuming that this will continue to increase in the coming years – especially as the legislator has set further incentives for such flexible retirement models under the AHV 21 reform. If you are looking to withdraw your pension fund assets as a lump sum, the partial-retirement plan also offers tax advantages. Because of tax progression, partial withdrawals generally incur less tax liability than a one-time withdrawal of the entire capital, subject to certain differences between cantons.
What should be taken into account when taking late retirement?
Actually, from a financial point of view, late retirement offers only advantages. In addition, you remain active. For some people, leaving the professional world is not easy, since not everyone knows how to fill their time in retirement. Important: Like partial retirement, late retirement requires the employer's consent.
Are you seeing any trends regarding retirement?
On the one hand, we see this desire for early retirement and fulfilling one's dreams in the third stage of life. On the other hand, life expectancy is rising, which means that the benefits of remaining professionally active for longer are not just financial. The most important trend we are seeing is a growing awareness of the ever-increasing importance of personal retirement savings.