Understanding your investments: beyond the reported performance
Investing is often presented as a matter of course. The markets offer opportunities, there are many solutions, and past performance is widely discussed.
Early retirement and AVS: an often underestimated angle
The idea of early retirement is becoming increasingly appealing.
Retiring early, slowing down, reorganizing your time, devoting yourself to other projects: the choice is often carefully considered and accepted.
However, behind this decision lie mechanisms that are sometimes poorly understood, particularly in relation to the AVS.
And it is often these mechanisms, considered secondary or technical, that can have a significant financial impact in the long term.
Understanding the implications of early retirement on the AVS is therefore an essential step in avoiding costly surprises.
What we focus on first… and what we often overlook
When someone is considering early retirement, attention is generally focused on a few key elements:
available capital, pensions from the second pillar, possible withdrawal from the third pillar, and the level of future expenses.
These factors are obviously central.
But they do not, on their own, provide a complete picture.One point is frequently underestimated: the AHV status of the person who is ceasing work.
Leaving the workforce before the legal retirement age does not mean leaving the AVS system.
Early retirement under the AVS: what really changes
En Suisse, une personne qui n’exerce plus d’activité In Switzerland, a person who no longer engages in gainful employment before the legal retirement age becomes, from an AVS perspective, a person without gainful employment.
This status has specific consequences:
- the obligation to continue contributing to the AVS until the reference age,
- a different method of calculating contributions,
- amounts that are sometimes much higher than one might imagine.
These contributions are no longer based on salary, but on wealth and replacement income.
In some cases, this can amount to several thousand or even tens of thousands of francs per year.
This point is often discovered late, sometimes after the decision to take early retirement has been made.
Why is this issue so often overlooked?
There are several reasons for this lack of awareness.
First, the AVS is perceived as a simple and relatively stable system.
Secondly, retirement projections often focus on pillars 2 and 3, which are considered more complex and variable.
Finally, the status of “person not in gainful employment” remains unclear to many.
As a result, early retirement is sometimes thought of as an incomplete financial equation, in which a key element is overlooked.
When anticipation makes all the difference
It is precisely on this type of issue that anticipation takes on its full meaning.
This is not an unsolvable problem, but rather a parameter that needs to be incorporated into the overall picture at an early stage.
Depending on the situation, there are a few different options to think about:
maintaining partial employment, adjusting the retirement schedule, reviewing income structure, or simply budgeting correctly for future contributions.
But first, you need to be aware that the issue exists.
A concrete example: savings made possible by a different interpretation
This reality became very clear to me through a real-life situation.
One person wanted to take early retirement at the age of 60, with solid assets and sufficient income to cover their future needs.
On paper, the plan seemed perfectly viable.
But upon closer analysis of their situation, one point became clear: their transition to non-working status would generate very high Social Security contributions over several years.
By working on structuring their transition to retirement—without calling their basic plan into question—it was possible to anticipate these contributions and adjust certain parameters.The result: savings of nearly CHF 100,000 in the period leading up to the legal retirement age.
This was not achieved through aggressive optimization, but simply through a better understanding of the rules and their implications.
What this example reveals
This type of situation is not unusual.
Above all, it illustrates a fundamental point: early retirement is not just a question of pensions and capital.
It is a comprehensive decision that involves closely related tax, social security, and asset management rules.
And it is often the interactions between these elements that make the difference.
Take a step back before deciding
When it comes to early retirement and Social Security, mistakes are not caused by a lack of intelligence or caution.
They most often stem from a partial view.
Taking the time to understand the mechanisms, identify blind spots, and ask the right questions allows you to approach this transition with much greater peace of mind.
Early retirement can be a great opportunity to rebalance your life.
However, it must be based on a complete and clear understanding of all the issues involved.