Do you also have a pension?

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When will I be retired? How old will I be? What world do we live in then? These are questions we all ask ourselves at some point. Maybe more specific, maybe less specific. The last two questions (and not the first yet, depending on your life situation) don’t have easy answers, but you still want to know them. After all, you want to be well prepared financially for old age.

Instructions are required. Guidelines based on years of experience from many experts that you can use as a guide to plan your retirement plan accordingly. They help identify and close retirement gaps.

As is known, we have a well-functioning pension system in Switzerland. Still: Columns 1 and 2 normally guarantee about 60 percent of the gross salary you received when you last retired. This means that if you do not continue to contribute to your pension, you will only have a little more than half of your previous monthly income from one day to the next. As a general rule, you should aim for 80 percent of your final salary to maintain a certain standard of living. If there is no guarantee that you will reach this guideline value of 60 to 80 percent, you have a retirement gap. It is assumed that approximately one in three Swiss people has such a deficit in their retirement conditions.

A common reason is, of course: you are not looking at your pension or you are looking at it too late. At some point, the pension gap, which can even be in the six-digit range, can no longer be contributed so easily.

However, it is usually quite normal situations that cause problems in preventive maintenance. For example – and this is especially true for mothers: you work only part-time or you cannot pay a pension for several years. Maybe it’s because you’re raising kids. Or because you are studying further or taking a break from your working years for more than a year.

Of course, early retirement can also increase the retirement gap.

It’s that simple so far: The percentages mentioned are very clear. However, they only apply on the X day of retirement, for which you need to be prepared. How do I know early enough what these numbers really look like to me? This is where arithmetic begins.

First you have to find out what annual requirement financial resources after retirement. This is an individual value that you must define using simple budget planning. It should also be clarified as to what goals/desires need to be fulfilled with or after retirement. It can be 80 percent of the income mentioned above. But that’s only one side of the equation.

The other side: Here it is determined how much income comes from the AHV pension (column 1, available from the cantonal compensation office) and pension fund pension (column 2, appears on the pension certificate). Let’s call this annual salary

The annual pension will most likely result in a smaller amount than the annual requirement. Then we multiply the difference between the two numbers by a factor of 25. This corresponds to 25 years – a good guide value for the average remaining life expectancy of a 65-year-old person in Switzerland. The result of this calculation is the pension gap. For most Swiss this should result in a net six-figure amount. Now the question arises: How do we contribute this amount to the annual pension and close the gap?

Pension fund is one of the most important retirement tools. On the one hand, it is wage-fed, but you also have the option of making voluntary purchases. The exact variants depend on the respective pension fund and its regulations, as well as on age and salary. You can find information in your individual retirement account statement.

Column 3 consists of restricted pension provision (3a) or unlimited pension provision (3b). Column 3a is primarily connected because you cannot withdraw the money as you wish. They are mostly used for retirement. It is also possible to use them for specific purposes (such as starting your own business, buying a house or major renovation projects). The federal government encourages voluntary savings through this column by allowing amounts paid to be deducted from taxes each year. However, an annual maximum has been set: in 2022, it will be over CHF 7,000 for first-time pensioners, to be precise: CHF 7,056.

In column 3b, amounts can be used more freely and therefore faster, for example before retirement age, and have no upper limit. Payments are not tax deductible until retirement. Under certain circumstances, tax deductibility is only possible when the pension is paid, provided that the legal requirements are met with the chosen 3b pension solution. These require a maturity of at least five years, payment after age 60, and a contract concluded before age 66 for this retirement option.

Pension solutions 3a and 3b can be supplemented with protection in the form of risk insurance for partners and children – or are often part of the offer. There are also traditional bank and securities solutions for creating retirement assets.

Different variants can be combined. For example, more and more Swiss are relying on a coordinated combination of Column 3a with a long-term savings horizon and Column 3b with a medium-term savings horizon.

If you take care of your finances early, you can reduce or at best close your retirement gap. Hypothetically, anyone who saves 7,000 francs over 30 years saves 210,000 francs. Depending on your personal investment and risk profile, it is recommended to review various retirement solutions and invest accordingly. Retirement options, such as account solutions, securities with – or stand-alone – life insurance solutions have different return expectations.

Source : Blick