�۶���Ƶ

So what happened after the information evening? Hannes Schoch, who was then earning 300,000 Swiss francs per year and had been planning for regular retirement, looked more closely at the regulations and correspondence of his employer’s pension fund for the first time – and he was surprised. At year-end, his occupational pension fund had informed him of a not so insignificant reduction in the conversion rate.

This change to the regulations would have a considerable impact on Hannes Schoch’s pension fund assets worth a total of 1.6 million francs. As well as the pension fund, Hannes and Marlies lived in a property valued at 1.2 million francs, which they purchased with a mortgage of 500,000 francs, and they also had 800,000 francs in liquid assets. They also had 180,000 francs set aside in pillar 3a accounts. Hannes Schoch didn’t hesitate for long. After an initial consultation with �۶���Ƶ pension expert, Fabienne Suter, Hannes began to really envisage early retirement and, after another consultation in which he was shown the financial options, he decided to go for it. In Schoch’s case, this meant that he left his job six months later and could benefit from the previous, more favorable pension fund regulations.

“As well as early retirement, partial retirement and part-time working hours are also popular options because, from a financial perspective, they’re not as drastic. However, the employer must agree and be able to let go of an employee in stages,” explains Fabienne Suter. In fact, employers and employees make the highest contributions to a pension fund in the last 10 years before retirement. This is when, on average, you collect a third of all your pension fund assets. Or it could mean the equivalent of six annual salaries could be missing. The general rule of thumb is that one year during early retirement costs approximately one year’s annual salary. The missing pension fund contributions, omitted interest up to regular retirement and the lower conversion rate that will generate a lower pension for life are all taken into account. At the same time, you must still make AHV contributions until you reach ordinary retirement. In this couple’s case, they had to pay a non-working contribution of approximately 6,000 francs per year.

“AHV is a cost factor that shouldn’t be underestimated in early retirement and it's also key in retirement planning,” highlights Fabienne Suter. Hannes Schoch wasn’t to be deterred by the costs of retiring early because early retirement let him buy a long-desired life away from the stress of work. Marlies urged her husband to reduce the pension fund payout to 400,000 francs because the security of a higher lifelong regular pension was very important to her. Hannes was also convinced by the proven asset concept (see graphic). The couple divided their assets of 1.4 million francs – consisting of a partial pension fund withdrawal, cash assets and the 3a accounts – into three different asset pools intended to serve different goals.

The first pool is exclusively for liquidity. It covers the short-term income gaps that early retirement entails, and it will also serve as their emergency reserve. The second pool, on the one hand, will serve to cover their excess spending and cost of living over the long term. On the other hand, they’ll also use this money to fulfill their lifelong goals. They have 300,000 francs in the third pool, which the Schochs don’t need for the moment and hope to bequeath to their children at the right time.

“Time is our most precious commodity and it’s priceless. Buying yourself more time in this regard is a costly business. Like with every acquisition, we recommend that you start planning in time to be as prepared as possible,” says �۶���Ƶ pension expert, Fabienne Suter. Thanks to a comprehensive pension plan, the Schochs can now enjoy an early and carefree retirement. And that’s how you make a dream come true.

^*Client name has been changed

This article was written by NZZ Content Solutions on behalf of �۶���Ƶ.