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Save taxes with staggered withdrawals in 2025

Baptiste Wicht | Updated: |

(Disclosure: Some of the links below may be affiliate links)

Most cantons use a progressive tax system for taxing retirement withdrawals. These withdrawals are coming from the second and third pillars.

This progressive tax system makes it more interesting to stagger your withdrawal over multiple years to save on taxes. This technique is called staggered withdrawals.

I want to discuss this in detail in this article and how you can use staggered withdrawals to save taxes on your second and third pillars.

Withdrawal taxes

When you withdraw your retirement assets, you must pay a tax on this withdrawal. This applies to assets from the second and third pillars.

These taxes are based on the amount you are withdrawing. As usual in Switzerland, you will pay taxes at three levels:

  1. The canton
  2. The municipality
  3. The country

For this, most cantons use a progressive tax system. Such a system means you pay a lower percentage for smaller amounts than larger ones.

The country (federal taxes) also has a progressive tax system, with the percentage increasing with the amounts. The municipality is a percentage of the cantonal taxes. So, if the cantonal tax is progressive, the municipality tax will also be progressive.

Here is the example of the canton of Fribourg:

  • 1% for the first 50’000 CHF
  • 2% for the next 50’000 CHF
  • 3% for the next 50’000 CHF
  • 4% for the next 50’000 CHF
  • 5% for any amount higher

With this system, we can run a few examples:

  • If you withdraw 40’000 CHF, you will pay 400 CHF.
  • If you withdraw 80’000 CHF, you will pay 1100 CHF.
  • If you withdraw 120’000 CHF, you will pay 2100 CHF.
  • If you withdraw 160’000 CHF, you will pay 3400 CHF.

Here are more examples in a graph:

Withdrawal Tax
Withdrawal Tax

So, we can see that this is not a linear system. What is very important to realize is that withdrawing multiple times small amounts is cheaper than withdrawing a large amount. If you withdraw 4 times 40’000 CHF, you will pay 1600 CHF in taxes. But if you withdraw 160’000 CHF at once, you will pay 3400 CHF. This is more than double!

Since the amounts are calculated yearly, you will need to stagger your withdrawals over multiple years.

Some cantons are worse, and some cantons are better than Fribourg. Since this can vary for each canton and municipality, I cannot show all results here. However, since the federal tax is progressive, it will always be important to stagger your withdrawals.

Staggered withdrawals

So, now that we know that we need to withdraw over multiple years, how can we achieve it? First, we need to see the rules for withdrawing the second and third pillars.

For the second pillar, if you have a pension fund, you must withdraw it at retirement age. If you have a vested benefits account, you can withdraw it up to 5 years before retirement and up to 5 years after. Up to 2030, you do not need proof of employment to withdraw after retirement. However, since 2030, you will need proof of employment.

We can withdraw our third pillar five years before the official retirement age. And we can postpone the withdrawal up to five years after the official retirement age. However, postponing the third pillar withdrawal requires proof of employment. This means that we will need to postpone retirement as well.

So, in a perfect world, you could spread your withdrawal over 11 years. However, this requires working after the retirement age since you need proof of employment. Therefore, in most cases, we should consider that most people can stagger their withdrawals over 6 years.

Theoretically, you could also use advance withdrawal before buying a house or starting a company. However, this is not applicable in most cases. Regardless, this could be another way of staggerring withdrawals.

So, let’s see how we can increase the number of withdrawals for the second and third pillars.

Get five third pillars

Unfortunately, you cannot do a partial withdrawal of a third pillar. You must withdraw an account all at once. So, you need multiple accounts if you want to stagger your withdrawals.

Fortunately, you can open multiple accounts. You should open five third pillar accounts. You may wonder why five since we can generally spread over 6 years. The reason is that most people also have a pension fund or a vested benefits account to withdraw, taking a year.

If you are married, taxes will be computed together. If you are the same age, you will have to withdraw following the same pattern. But if you have some age difference, this means you will be able to withdraw over more years. So, make sure you take that into account.

A good thing about this system is that you can open multiple accounts with the same provider. A good third pillar provider will allow you to create up to five accounts. If you need a good third pillar, you can look at the best third pillar for Switzerland.

And unfortunately, you cannot split a third pillar account. So, this is something you must plan.

Get two vested benefits accounts

If you are employed until your withdrawal, you must withdraw from your pension fund at once (unless you have two employers and two pension funds, but this is rare).

However, if you are not employed, you could have several vested benefits accounts. For this, when leaving your pension fund, you could ask them to send the money to two different vested benefits foundations. It is important that you need two different foundations. You cannot have multiple accounts with the same foundation.

However, some providers have two foundations. So, you can have two accounts at the same provider if it has two foundations. If you do not know where to start, look at the best vested benefits account.

Once again, you cannot split a vested benefits account, so you must plan.

How much can you save?

While you could, in theory, split your withdrawals up to 11 years, most people will only achieve up to 6 years since most people will work until the reference retirement age and will not be able to postpone withdrawals since they will not be employed.

So, in theory, you could split up your withdrawals in equal chunks of 1/6 of the total. However, this ignores that most people will have significantly more in their second pillar than in their third pillar. Since the contribution percentage increases over time, the contributions to the second pillar will quickly outpace the contribution to the third.

On average, we can imagine that most people will have double the money in their second than in their third pillar. This is an average, of course, but it makes sense.

So, if you have 200’000 CHF in your second pillar and 100’000 CHF in your third pillar, you will still have to do a single 200’000 CHF withdrawal and five 20’000 CHF smaller withdrawals. This will still result in very nice tax savings, but significantly less than if you could split the second pillar.

In that case, you would pay 5600 CHF in cantonal taxes instead of 10’000 CHF. This is a very good improvement in favor of staggered withdrawals.

If you split your second pillar withdrawals, you could optimize it further by withdrawing four times 25’000 CHF and twice 100’000 CHF. With that extra step, you would only pay 3’250 CHF in cantonal taxes. In this case, staggering your withdrawals divides your taxes by three.

From that, we can draw a few conclusions:

  1. Staggering your withdrawals is very effective!
  2. In practice, most people will only be able to split their withdrawals over six years.
  3. The strategy becomes more and more effective the more money you have.
  4. Splitting vested benefits can be very effective if you can achieve that.

One question you may ask yourselves is whether this is legal. Currently, it is legal, but there are some limitations.

Many people feel this is tax evasion and want to pass new laws to limit it. Already, with the OASI 21 reform, staggered vested benefits are more difficult than before.

Also, some cantons are stricter than others. For instance, the canton of Vaud only allows staggering for 3 years, and the canton of Neuchatel only allows 2. After these points, they will consider this tax evasion.

We will likely see stronger regulations to avoid this in the future. However, we should not stop trying to have 5 third pillars and, ideally, two vested benefits accounts. Since this is currently possible, we should still try to do it. And even if it is not possible in the future, you can always withdraw multiple accounts per year to abide by the law.

The important point is that since you cannot split them later, it is important to be prepared. You never know in which canton you will retire. So it is better to be prepared. Having multiple accounts is never an issue. Staggering over too many years can be an issue in some cantons.

Conclusion

Staggering your retirement withdrawals can save you a significant amount of taxes. However, you must plan for it since you cannot split a third pillar or a vested benefits account. Therefore, you should always consider this when managing your retirement assets.

I recommend anybody open five third pillar accounts and try to balance them over time. You can simply send the money into the account with the lowest amount over time, which will be more or less balanced.

If you have the opportunity, it is also a good idea to split your pension fund into two vested benefits accounts before the official retirement age. But I realize this is an optimization that is only doable for people retiring before the reference retirement age and able to live without these funds for some years.

I plan to reach ten third pillar accounts (5 for me and 5 for my wife) by the age of retirement, more or less balanced. If my plan to retire early works, I will split my pension fund into two vested benefits accounts. Then, we will spread all these accounts for 6 years.

What about you? Are you planning to stagger your withdrawals?

    Recommended reading

    Photo of Baptiste Wicht
    Baptiste Wicht started The Poor Swiss in 2017. He realized that he was falling into the trap of lifestyle inflation. He decided to cut his expenses and increase his income. Since 2019, he has been saving more than 50% of his income every year. He made it a goal to reach Financial Independence and help Swiss people with their finances.
    Discover Swiss Financial Secrets That Maximize Your Money!

    Learn easy ways to optimize your finances and save thousands in Switzerland with our exclusive e-book. Learn about the most cost-effective financial services tailored for savvy residents and expats!

    Get Your FREE Swiss Money-Saving Guide

    91 thoughts on “Save taxes with staggered withdrawals in 2025”

    1. Hi Baptiste,

      I find your blogs very helpful and interesting. I have a couple of things going through my mind and am not sure if it’s the right move. First of all, I want to add that I just retired and live in Canton ZH. I have invested my two vested benefits accounts( 100k each) in two different banks. Since the covid pandemie, my vested benefits custody accounts seem to just eat up all my returns. The fees are way too high. I’m new in this investing world and don’t know if I should withdraw them now (one at a time/year, because of capital tax) and invest with Swissquote or Interactive Brokers in ETFs. Is this a wise move? With the high fees the bank charges, I don’t think my initial plan of growing my wealth for retirement will not be realised.

      1. Hi Joyce

        I am glad you like my content :)

        If you can withdraw them (one per year) and invest them yourself, I think that’s the most sensible course of action. You could also transfer it to a better vested benefits account, but this may be “late” for you if you already retired (early I guess).
        But that will depend on whether you are comfortable investing by yourself.

    2. Hi Baptiste.
      My question. I understand the staggering. But should we also look to de-risk the investments in the last 5 years , or do you recommend keeping 100% in equities right up until you need to withdraw. I have just turned 60 , so its something I am thinking to do.
      I notice some vested accounts let you transfer direct into an investment account on retirement, so you don’t need to sell any holdings , is that a good idea ?

      1. Hi Niall

        You could de-risk if you want. But that’s really up to you. I intend to start retirement with 100% stocks. And some people will actually start with bonds and use a glidepath to increase their stock allocation while in retirement.
        Generally speaking, the best vested benefits and 3a accounts will not let you transfer to a standard. Indeed, doing so would mean they are not using the best available funds in the first place.

    3. Hello Baptiste,

      First of the all, thank you very much for your blog and the very detailed explanation. I’m thinking to leave Switzerland in some years, but I’m far away from the retirement. I pretend to leave to Portugal, but as far as I know is not possible to take the 2nd pillar. Is it still correct? What about the 3rd pillar? Can I withdraw?

      Thank you

      1. Hi Tiago

        I am not sure this is correct. Portugal is part of the EU, so you should only be able to withdraw the over-mandatory part, not the entire second pillar.
        As far as I know, you can always withdraw the third pillar.

    4. I am moving outside Switzerland in 3-4 months. and I would like to optimise the withdrawal tax not sure if I should withdraw the money or keep it in vested benefit account? Any guidance

      1. First, keep in mind that depending on the country you are moving to, you will not necessarily be able to withdraw your second pillar entirely upon leaving.

        There are a few factors to consider:
        * How much do you expect your vested benefit to grow between now and your retirement age?
        * Is the tax domicile of the vested benefits foundation better than your tax domicile for withdrawal taxes?

      2. I moved out of Switzerland a few years ago. Some pointers:

        Compare the withdrawal taxes against the withdrawal fees of your pension fund. Withdrawing your capital through Liberty Stiftung in the canton Schwyz minises your taxes. But Liberty charges around CHF 500 per withdrawal. If you only have a small amount of pension capital (less than 20k) in a fund that does not charge for withdrawals, it may make sense to withdraw the capital from a fund in a canton other than Schwyz. The funds disclose the fees in their statutory rules, available on their websites.

        For a large amount of pension capital (more than 50k), move the 3a capital to Viac and the BVG capital to Liberty Stiftung in the low-tax canton of Schwyz. Liberty is generally willing to open an account even if you withdraw the capital immediately afterwards. If you reveal your intention to withdraw the capital at the start, some funds may refuse you. Staggering withdrawals is possible but every withdrawal is somewhat complicated and bureaucratic. It is much easier to withdraw the capital when you leave Switzerland, as compared to later on. It may be easier to bite the bullet with a single withdrawal and be done with it, even if it costs you a few hundred or thousand francs.

        For amounts above 100k, consider hiring an experienced tax advisor. A friend of mine does this, his website is Swisstaxexpert.com. He can save you tens of thousands.

        When you withdraw your pension capital to a Swiss bank account, the receiving bank will know that you are leaving Switzerland. They may close your account, start asking questions and charging high fees. So before you leave Switzerland, you may want open a burner bank account, for example at Zak, just to receive this pension capital.

        1. @Niall: Viac was ok for my 3a withdrawal. Viac did not charge any withdrawal fees, and the tax savings of moving the capital to Schwyz were not substantial enough. If you have a very large amount of 3a capital, perhaps a transfer to Schwyz may be worth it.

          If you withdraw capital from funds in different cantons, chances are that each of the cantonal governments will not know about the other withdrawal in the other canton. They do not have the systems, they are too stupid and too lazy to check. So chances are that each withdrawal will be taxed at a low rate, as if it was the only withdrawal. Best of luck!

    5. Hi Baptiste,

      Thank you as usual for you very helpfull articles.

      Regarding the vested benefit account, if I change job in 2025 and send the money to 2 different VBA, then get a new job, without transferring the content of the 2 VBA into the new 2nd pillar fund, and let say I change again in 2035, can I move the 2nd pillar amount into 2 new VBA? so I’ll have 4 VBA and a las 2nd pillar fund, to do the staggering withdrowal?

      Thank you,
      F.

      1. Hi Fabrizio

        In theory you can do that yet.
        But in theory, you should also moved back the money from your VBAs into the new pension funds when you start working even though many people do no do it and it’s not enforced as far as I know.

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