Switzerland is renowned for its comprehensive solidarity system, which impacts various aspects of life, including retirement. This guide will help you understand and take actionable steps to manage and plan your retirement in Switzerland effectively, ensuring you secure your future and maintain your standard of living.
Foreigners absolutely need to understand this system to make the most of their retirement in Switzerland. The Swiss retirement age is 65, so you effectively need to make a long-term financial plan that spans give or a take 45 years – your entire professional career.
The first pillar is mandatory for everyone working in Switzerland and includes the old-age and survivor’s insurance (OASI) and disability insurance. These insurances cover basic needs in old age or in the event of death, ensuring the livelihood of those who suffer from disability.
The second pillar, known as the occupational pension fund, is compulsory for employees who work for more than three months and earn at least CHF 21’510 annually. This pillar consists of a savings plan and provides insurance against disability and death. Pillars 1 and 2 form the absolute bare minimum of what is required to live and by itself are not enough to combat the effects of inflation.
The third pillar, or private pension, is a voluntary savings plan allowing you to save additional funds for your retirement. Pillar 3a solutions are tied to retirement age and have great investment returns, while pillar 3b are always accessible. This pillar offers significant benefits, including:
A pillar 3a plan must be one of your key points when you're planning your retirement in Switzerland. Expat Services Switzerland is here to support you & set up your pillar 3a solution for you.
Consult me for a pillar 3a plan!Here is how you as an expat can proceed to plan your retirement in Switzerland:
Start by reviewing your current pension plans and contributions to the first and second pillars. Understand how much you have saved and what your projected income will be upon retirement.
Important note: Most people in Switzerland are not aware of just how large their retirement gap is. You cannot rely solely on the pillars 1 & 2.
Action: Gather your pension statements, financial documents, and talk to financial experts to estimate your future pension income.
Decide on the lifestyle you wish to maintain during retirement. Consider factors such as healthcare costs, travel, hobbies, and any anticipated large expenses.
Important note: Do not underestimate your living costs in retirement. Many people believe their ongoing expenses suddenly drop in retirement, as they've "finished" all of their major life goals, but that could not be further from the truth. Your personal health costs will most likely increase in age, and there are also higher insurance premiums, taxes, and rent hikes to worry about.
Action: Create a detailed list of your retirement goals and associated costs. This will help you determine the amount you need to save.
Take full advantage of the tax-deductible benefits of the third pillar by maximizing your contributions. As of now, the limits are CHF 7’056 for employees and CHF 35’280 for individual entrepreneurs.
Action: Have an expert set up your pillar 3a plan and arrange for automatic monthly contributions to ensure you consistently save the maximum amount.
Consult me for a pillar 3a plan!If you’ve got a family, you’ve got a special responsibility to take care of your loved ones. In a worst-case scenario, you might find yourself unable to support them.
Action: Look into child saving plans, life insurance, and disability insurance to ensure your family is taken care of. These plans can be part of your pillar 3a solution.
There is a saying to never put all of your eggs in one basket - this holds true for your retirement planning as well. Your ideal goal should be a diverse financial strategy that grants you multiple income streams. This might include a mix of conservative savings accounts, passive real estate income, bonds, and more aggressive investment funds.
Action: Consult with a financial advisor to build a diversified investment portfolio that aligns with your risk tolerance and retirement goals.
Healthcare can be a significant expense in retirement. Ensure you have adequate coverage through both the compulsory first pillar and supplementary insurance solution.
Action: Review your healthcare coverage options and consider purchasing additional insurance if necessary to cover potential medical expenses.
Get started on supplementary health insurance!Understanding the tax implications of your retirement savings and withdrawals is crucial. Take advantage of any tax benefits and plan withdrawals to minimize tax liabilities.
Action: Work with a tax advisor to understand the tax implications of your retirement plan. Note that the most valuable tax-deductions are related to major life-milestones, and have your tax advisor optimize accordingly.
If you’re new in Switzerland, you face a greater risk of poverty in retirement because you haven’t made any contributions to pillars 1 & 2 before. Luckily, you may be able to make voluntary, retroactive contributions into these pillars (which can also be deducted from your taxes). Note that certain conditions may apply, like a time- and payment limits.
Action: Talk with your canton’s OASI office to learn if retroactive payments are for you.
If you can take care of these 8 key steps, you will have a good outlook towards your retirement.
At Expat Services Switzerland, we specialize in helping foreigners navigate the Swiss retirement system and help you get started on your pillar 3a plan. Our expert advisors will assist you in securing a comfortable retirement. Contact us today!
In this article, we would like to talk about the two types of 3rd pillar, its advantages and how we can help you with finding your personal pension strategy.
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