Early retirement at 58 or 60: What it really costs
February 18, 2025
4 min read
arvy's Teaser: You're 55 or 58 and thinking: "I don't want to work until 65." You're not alone — almost every other Swiss resident thinks about it. But between the wish and the reality lies a calculation most people underestimate. AHV reduction, pension fund gap, health insurance, missing contribution years — the costs add up quickly to CHF 200,000 to CHF 500,000. Here's the honest mathematics.
−6.8%
AHV reduction per year of early withdrawal — permanently, for life
CHF 82,000
Less AHV over 20 years with 2 years early withdrawal
CHF 514–25,700
AHV contributions as non-employed per year
The 5 cost factors nobody has on their radar
1. AHV reduction: −6.8% per year of early withdrawal
You can draw the AHV pension from age 63. But each year costs you 6.8% — permanently, for life. Two years early (at 63 instead of 65): −13.6%. At a maximum pension of CHF 2,520/month, that's CHF 343 less — every month, for the rest of your life.
Over 20 years of retirement: CHF 82,000 less.
2. Pension fund pension: less capital, lower conversion rate
Those who stop earlier have less pension fund capital (the final contribution years with the highest savings rates of 18% are missing) AND often a lower conversion rate (many funds reduce the rate by 0.15–0.2% per year for early withdrawal).
Example calculation: Pension fund pension at 60 vs. 65
At 65: CHF 500,000 capital × 5.4% conversion rate = CHF 27,000/year
At 60: CHF 400,000 capital × 4.8% conversion rate = CHF 19,200/year
Difference: CHF 7,800/year less — permanently. Over 25 years: CHF 195,000.
3. The gap to AHV: 2–7 years without state pension
If you stop at 58 or 60, you receive an (already reduced) AHV pension at the earliest at 63. The years in between must be funded entirely from your own assets. At CHF 6,000/month in living costs:
From 60 to 63 (3 years): CHF 216,000 out of pocket.
From 58 to 63 (5 years): CHF 360,000 out of pocket.
4. Health insurance: no employer anymore
As an employee, your employer often covers part of the daily sickness benefit insurance. After early retirement you pay everything yourself. Expect CHF 400–600/month in extra costs.
5. AHV contributions as a non-employed person
Most people forget this: even without employment you're liable for AHV contributions until age 65. Depending on your assets: CHF 514 to CHF 25,700 per year. And missing contribution years further reduce your already reduced AHV pension.
The total calculation: what you need to stop earlier
| Monthly living costs | Stop at 62 | Stop at 60 | Stop at 58 |
|---|---|---|---|
| CHF 5,000/month | ~CHF 130,000 | ~CHF 310,000 | ~CHF 500,000 |
| CHF 7,000/month | ~CHF 180,000 | ~CHF 430,000 | ~CHF 700,000 |
| CHF 10,000/month | ~CHF 260,000 | ~CHF 620,000 | ~CHF 1,000,000 |
Additional capital needed beyond AHV+pension fund income, until end of life (~85). Incl. AHV reduction and lower pension fund pension. Strongly simplified.
The table is sobering. But it's also a clear answer: early retirement isn't a question of wanting, but of having.
How it works anyway: The 4 levers
Lever 1: Partial retirement instead of full retirement
Many pension funds allow partial retirement: reduce your hours to 60% or 40%, draw part of the pension fund, and continue working. The AHV contribution gap doesn't arise, the pension fund keeps growing. Often the smartest solution.
Lever 2: Pension fund bridging pension
Some pension funds offer a bridging pension: a higher amount until 65 (compensating for the missing AHV pension) and a lower one afterwards. Check your pension fund regulations — not all funds offer this.
Lever 3: Lump sum + own investment strategy
Instead of taking the pension fund annuity, you withdraw the capital and invest it yourself. With a 3.5–4% annual withdrawal rate at CHF 500,000 capital, you can take out CHF 17,500–20,000/year — and the capital still lasts 25–30 years.
Lever 4: Invested portfolio as a bridge
Free invested wealth is the most flexible lever. Those who invested consistently via savings plan from 40 or 45 will have at 58 or 60 a portfolio that can finance the bridge years — without touching the pension fund or 3a prematurely.
Example: The savings plan as bridge
CHF 1,000/month invested from 45, for 15 years (~6% return) = ~CHF 290,000. Enough to close the gap from 60 to 65 at moderate living costs.
Starting at 35: CHF 500/month × 25 years = ~CHF 346,000. Even more comfortable.
"Early retirement isn't free. But it's plannable. The earlier you start calculating and investing, the more freedom you'll have at the end."
Frequently asked questions about early retirement in Switzerland
How much does early retirement at 60 cost in Switzerland?
It depends on your living costs. At CHF 7,000/month and retiring at 60, you need around CHF 430,000 in additional capital compared to normal retirement at 65 (including AHV reduction, lower pension fund pension, bridge years to AHV). The earlier, the more expensive.
How much is the AHV pension reduced for early withdrawal in Switzerland?
6.8% per year of early withdrawal — permanently, for life. Two years early (at 63 instead of 65): −13.6%. At CHF 2,520 maximum pension: CHF 343 less per month, CHF 82,000 less over 20 years of retirement.
What is partial retirement (Teilpensionierung) in Switzerland?
Reducing your hours (e.g. to 60%), drawing the corresponding pension fund share, and continuing to work part-time. Benefits: no AHV contribution gap, pension fund keeps growing, income continues. For many people the best solution: more free time without the full financial shock of early retirement.
Do I have to pay AHV contributions after early retirement?
Yes — as a non-employed person you're liable for AHV contributions until 65. The amount depends on assets and pension income: CHF 514–25,700 per year. Exception: if your spouse is still employed and earns at least CHF 10,000/year, you're covered as a non-employed person at no extra cost.
Let us calculate your early retirement.
How much do you need? How do you invest the bridge years? Partial or full early retirement? The savings plan as bridge — from CHF 1/month.
Start savings plan | Open Pillar 3a» FIRE Calculator: How much do you need for early retirement?
Disclaimer: General information only. All calculations are strongly simplified and illustrative. The actual costs of early retirement depend on many individual factors. arvy is an asset manager supervised by FINMA.
