Reaching pensionable age may seem a long way off – but sometimes it arrives faster than you think. This is why it’s crucial you not only dream about your retirement but also start to plan it actively. Ideally, you should start with pension planning around ten to fifteen years prior to reaching retirement. This allows you to prepare well for entering retirement and undertake any necessary measures or decisions. Ask yourself the following questions to establish a basis for making smart retirement decisions.

Am I an early retiree or a postponer?

These are the first questions you should consider:

• When do I want to or when am I able to start my retirement?
• Do I want to retire at the ordinary OASI reference age?
• Would I prefer to enjoy the retiree life somewhat earlier?
• Would it be financially viable for me to enter retirement early?
• Or would I prefer to postpone retirement and carry on in the world of work for longer?

It is worth starting to think about potentially taking early retirement – after all, this decision will also have an impact on your asset growth and retirement strategy. The same applies for semi-retirement or postponing retirement.

Here’s how to go about it

For early retirement

You can take early retirement from as young as 58 years of age and start a whole new phase of life after your career. But early retirement does not come cheap – quite the opposite. So you should clarify whether you can afford to retire early and which financial arrangements you should now be making. You can find more about this in the “How is my retirement plan looking?” section.

For semi-retirement or postponing retirement

Some people will want to continue working, even after reaching the AHV retirement age. It is possible to postpone your retirement to as late as 70 years old in consultation with your employer or you can phase yourself into retirement gradually by reducing your working hours, for example. If you’re considering one of these two options, it’s important you talk to your employer and work out what options may be available to you in your current work environment.

So there are a wide range of options between early retirement and postponing retirement – with many different ways of bidding farewell to the world of work. 

How is my retirement plan looking?

It is important that you get an overview of where things stand with your retirement planning and your assets in general. So make sure you consider the following questions:

• How much money will I have when I retire?
• How much money do I need for my retirement?
• Have I always used the option of paying into pillar 3a?
• Is there anything I can optimize here in the coming years?
• Is it worth paying into my pension fund so that I receive a higher pension later on? And have I considered the tax implications of doing so?

You need around 70 to 80% of the budget you previously spent each month for your life after retirement. AHV and your pension fund generally do not cover this amount in full. That’s why it’s so important to get your private retirement planning on track.

Here’s how to go about it

Get together all the documents you need to work out your finances after retirement. These include tax returns, pension fund statements and rules, pension certificates, statements from your retirement account(s), account statements, custody account overviews and evidence of home ownership (including mortgage documents concerning items that need to be deducted from your assets) or life insurance policies. There may also be potential for increasing your capital in the 3rd pillar using a retirement fund to achieve higher yields. You can find more about this in the “How should I change my investment strategy?” section.

How do I want to draw my pension money?

There are various possibilities for accessing your pension fund assets: either have them all paid out in one go, draw on your capital each month as a pension, or choose a combination of both options. Of course, this all depends on how you want to spend your life as a retiree. Consider the following questions to work this out:

• How would I like to spend my time after retirement?
• Do I have plans to emigrate?
• Would I like to buy a holiday home?
• Or will I keep on living as I did before and draw on my pension as an income each month? 

Here’s how to go about it

For most people, it is wise to cover your living expenses each month with a pension, and then draw on the rest as capital. You can also look into a staggered payout from your pension fund assets and check whether your pension fund can transfer the money to several vested benefits accounts, for example. This could help you slightly reduce the tax burden you face when drawing on your pension money. You can find out more about this in the article “Retirement savings 3a: save on taxes with these tips”.

You should also look into the conversion rate for your pension fund. This rate determines how much money you will receive each year as a pension. Here is a specific example: if you have CHF 80,000 credit in pension fund assets and the conversion rate is 6.8%, you will receive CHF 5,440 annually after retirement (6.8% of your capital). The minimum conversion rate for mandatory pension fund assets is set by the Confederation. For any funds beyond this threshold, the conversion rate is set directly by the respective retirement savings foundation and is generally far lower than the rate set for the mandatory assets. This means the conversion rate is an important indicator of the level of your old-age pension. And those retiring early need to be aware that the conversion rate will be lower – for both the mandatory and non-mandatory assets.

How does my budget look after retirement?

You need to set a precise budget for your life as a pensioner. 

• How much money will you need each month for living expenses?
• And how can you cover these costs? 

Here’s how to go about it

Work out your budget by deducting all your expenses from your retirement income. Learn more about working out a budget in our article “Budgeting made easy: five tips on budget planning”. You can also find budget plans online that help you compare your pre- and post-retirement budgets. Don’t forget that many expenses which you used to deduct for tax purposes while you were working will no longer be tax-deductible (professional expenses, payments into pillar 3a). You will quickly find out whether you have an income gap that needs to be bridged and, if so, how much it may be.

How should I change my investment strategy?

Upon retirement and in the preceding years, you should review your investment strategy by considering the following questions:

• Have I already invested in a retirement fund or am I planning to do so?
• What do my investment horizon and investor profile look like?
• How will my investment strategy change when I retire?

Here’s how to go about it

The years before you retire

You may be able to increase your assets using targeted financial investments depending on the age at which you start planning your retirement. This includes your private pension using pillar 3a: invest your pension capital from the retirement savings account 3a in funds in order to benefit from long-term opportunities on the financial markets. PostFinance offers various retirement funds but be aware that the equity component may vary depending on the risk-return profile. When investing in retirement funds, you have to accept price fluctuations depending on how much risk you are willing to assume. Find out about the differences between retirement savings accounts and retirement funds and how you can benefit from a retirement fund in our article “How to get more from your retirement planning”.

When you’re retired

How you decide to draw on your pension money also has an impact on your investment strategy: if you take your capital in one lump sum, this will give you a large sum of money and the flexibility to invest it in various financial instruments. If you want to draw on the money accrued in your retirement account as a pension, this will give you a certain amount of security similar to the monthly salary payment you used to receive. With a combined approach, pension payments will give you a secure foundation but you will still have some capital to invest as you wish.

You will need to review your investment strategy once you pass retirement age since your goal will no longer be building assets, it will be securing an income – this is essential for enjoying your retirement without having to worry about money.