Early retirement: How do you turn this dream into reality, and what pitfalls should you avoid?
Like all life projects, the success rate increases when the project is prepared. So, how can you make your early retirement a reality and better prepare for the possibility of retirement ...?
Financial feasibility
It is crucial to assess the financial feasibility of taking early retirement. It's essential to determine your financial room for manoeuvre and to set aside reserves for future expenses, such as buying a car or going on holiday, as well as for unforeseen events.
Minimum age for retirement
For AHV benefits, you can bring your pension forward by up to 2 years. For the second pillar, the minimum age is 58. It is essential to check the conditions in your pension fund regulations.
Reduction in projected assets or pension
Early AHV contributions reduce your pension by 6.8% a year. As far as the second pillar is concerned, it is difficult to quantify, but this can quickly represent a substantial hole in your retirement capital. Remember, you can make up this shortfall by purchasing from your pension fund.
Continuation of pension cover for services previously provided.
It's essential to check whether your pension fund allows you to continue to provide pension cover for services previously insured in the event of partial retirement, which can help you avoid a reduction in your pension and save tax.
Provisions of your pension fund regulations
Before applying for early retirement, it is essential to understand all the provisions of your pension fund regulations, including pension reductions and the deadline for applying for a lump-sum withdrawal, where possible. By law, pension funds must allow you to withdraw at least 25% of your capital. Sometimes, you may have to submit your application several years in advance.
Here are a few tips to help you achieve this.
1. Drawing up a financial plan
Financial planning is crucial if you want to retire early and safely. This involves analysing your financial situation, determining your goals, and creating a roadmap with opportunities and risks.
2. Maximise your occupational pension fund (2nd pillar)
Your pension fund can be a valuable tool in maximising the success of your project. It is important to choose the most appropriate options for your situation, such as a superior plan or buying back missing years, while checking the quality of the pension fund and its regulations. Some pension funds also offer solutions to compensate for the loss of income due to early retirement.
3. Invest your savings in suitable private pension solutions (3rd pillar)
Investing in personal pension solutions is an important strategy for early retirement preparation. The 3rd pillar is a long-term investment product, so it's important to start investing early to benefit from compound interest. The tax benefits of these savings will give you more money to enjoy in retirement.
4. Structuring your assets
Planning for the unexpected is important to structure your assets by creating a cash reserve for short-, medium- and long-term expenditure. This will enable you to maintain your initial strategy regardless of the ups and downs of life.
Prepare now for early retirement.
By planning now, you can safely maximise your chances of taking early retirement. It's important to consider your situation's financial aspects and develop a coherent strategy. Don't hesitate to consult an estate planning advisor to help you with this process.