The retirement system of Switzerland is based on three pillars. Each pillar adds more coverage to your pension once you are retired. Switzerland system is based upon the official legal retirement age of 65 for men and 64 for women. It is generally possible to take retirement a bit earlier, but no earlier than 58 years old. So there is nothing really related to early retirement in the system. Nevertheless, it is still an important part of retirement because there are many advantages in knowing what you can do with this system. If you take advantage of the possible optimizations of the system, it can help you towards Financial Independence.
I have written one post for each pillar of retirement of Switzerland. For each of the pillar, I will give you details on a specific pillar and also information about how to optimize its usage. I have also written a general summary of the system. In this last post, you can also find out about my current strategy and the implications of the system and early retirement.
The first pillar is a mandatory state pension. Every people pay this directly either directly from their salary or with a bill if they do not work. And every people in Switzerland is entitled to get a pension from the first pillar. What you will receive from the first pillar will depend on your salary and how many years you contributed. However, it will only cover the very basics of your life in retirement. And there is very little you can do to optimize your first pillar. That is why the other pillars are very important.
The second pillar is an occupational pension for workers. Only people who work are contributing to the second pillar. And consequently, only people who contributed to it will receive a pension (or a lump sum) once they reach retirement age. The second pillar is more complicated than the first pillar in that it will depend on the company you are working with.
Moreover, you can also contribute voluntarily to it. There are some tax advantages in doing so. Find out whether you should contribute to your second pillar.
The third and last pillar of Switzerland’s retirement system is a private pension. It is entirely optional. It is also reserved for people who are contributed to their second pillar. You can have your third pillar in a bank or in the form of life insurance. There is a nice tax advantage in contributing to the third pillar. And you can choose where you want to invest your third pillar. That gives it a lot of opportunity for optimization.
Choosing a third pillar account is not an easy task. Currently, I believe that VIAC is the best third pillar in Switzerland. If you are convinced, you can find out how to open a VIAC account in a few minutes.
Overall, the three pillars of the Swiss retirement system are a strong way to prepare for retirement. They are nice tools you can do to optimize your taxes and maximize your pension for when you retire. However, they will do little for you between early retirement and official retirement. So if you plan to retire early, you will still need to plan other things than simply this system. You need to account for the fact that you will get a pension and some money at the official retirement age. So your planning should be different for the years between early retirement and official retirement.