What Early Retirement Really Costs
Stopping two or three years early is a common wish, but its price hides in three systems at once: AHV, the pension fund and your own assets. The cost doesn't show up in the year you retire — it shows up decades later.
Early retirement sounds like a single decision. Financially it is three – because AHV, the pension fund and your private assets each react in their own way, and every reaction lasts a lifetime.
AHV: the reduction and the contribution obligation that keeps running
The AHV pension can be drawn up to two years before the reference age – known as a Vorbezug (early withdrawal) – in exchange for a reduction that lasts for the rest of your life. Less well known is the other side of it: the obligation to pay AHV contributions doesn't end with your last day of work, but only at the reference age. If you stop earlier, you pay contributions until then as a non-employed person – assessed on your assets and pension income. And if you don't use the early withdrawal at all but still miss contribution years, you risk gaps that will also permanently reduce your pension.
Pension fund: the double reduction
In the second pillar, early retirement has a double effect. First, you lose the final contribution years – precisely the ones with the highest retirement credits – along with the interest and compound interest on the entire balance. Second, most pension funds reduce the conversion rate for every year of early retirement: a smaller balance gets converted at a lower rate into a pension that then has to last longer. Some plan regulations offer a bridging pension until AHV begins – usually financed, however, through an additional, lifelong reduction.
The gap years
Between your last salary and the first unreduced pensions lie the most expensive years of the plan: the household lives entirely off its assets, while health insurance, housing costs and taxes keep running. These are also the years in which others make their highest savings contributions. Every franc withdrawn here is then missing twice over – as capital and as future return.
It becomes visible at 80, not at 60
The tricky part about early retirement: in the first year, it usually feels perfectly affordable. But the pension reductions and the earlier drawdown of your assets only show their full effect over decades – the decisive question isn't whether it's enough at 60, but whether it's still enough at 85.
In Wealth4Life, you can place the earlier exit as a scenario next to the standard one: with reduced pensions, non-employed contributions, asset drawdown and taxes in every single year. That's when it becomes clear what the years you've gained actually cost – and whether your own plan can carry them.