How much does early retirement cost in Switzerland?

The reduction of the AVS pension

You can draw your AVS pension one or two years before the reference age. In return, it is permanently reduced: the cut applies for the rest of your life, not only during the years of early drawing.

For one or two years early, the pension is cut by a percentage set by law. Over twenty years of retirement, this lifelong reduction adds up to a significant total cost, to weigh against the gain in free time.

The years of income to fund alone

This is often the heaviest item: between your departure and the start of the pensions, you must cover your entire lifestyle without a salary. For two years of budget at CHF 6,000 per month, expect around CHF 144,000 of capital to mobilise.

This funding bridge usually comes from 2nd-pillar capital withdrawn early, the 3rd pillar and private savings. The earlier you leave, the longer the bridge to fund.

The shortfall on the 2nd pillar

Leaving earlier means stopping pension-fund contributions and giving up the retirement credits and interest of the final years, often the most generous. Your final savings, and therefore your LPP pension, are reduced.

On top of that, early retirement applies a lower conversion rate, which further reduces the pension obtained for the same capital. The combined effect can be significant.

AVS contributions until the reference age

If you stop all gainful activity before the reference age, you remain subject to the AVS as a person without gainful activity. You must keep contributing, otherwise you create gaps that would further reduce your future pension.

The amount of these contributions depends on your wealth and your pension income. It is a recurring cost to factor into the budget of the early years.

How to estimate the capital needed

Add three elements: the income to fund until the pensions start, the cost of the lifelong reduced AVS pension, and the transitional AVS contributions. Then compare this total with your available assets (2nd pillar, 3rd pillar, savings).

RetirePlan models this scenario: it quantifies the capital required for each departure age and shows the impact on your lifelong pension, so you can decide with full information.

Frequently asked questions

How much does the AVS pension drop when drawn early?

The AVS can be drawn one or two years early, with a permanent reduction set by law. The cut applies for life, which makes it a major cost over the whole retirement.

How much capital do you need for early retirement?

You must fund your lifestyle between departure and the start of the pensions, plus the cost of the reduced AVS pension and the transitional AVS contributions. For two years at CHF 6,000 per month, the bridge alone is already around CHF 144,000.

Do you still pay AVS contributions after early retirement?

Yes. Without gainful activity before the reference age, you contribute as a person without activity, based on your wealth and pensions. Failing to do so creates gaps that reduce the pension.

Does early retirement also reduce the 2nd-pillar pension?

Yes. You contribute for less time and a lower conversion rate often applies to an early departure. Your LPP pension is therefore lower than if you worked until the reference age.