Why you should plan for your future

• How our life expectancy is changing
   
• What you can expect financially in your old age

Women have a longer life expectancy than men - the average remaining lifespan for 65-year-old women is currently around 22 years and for men around 19 years (Swiss Statistical Office 2020).

So many of us, especially women, live quite a long time after reaching retirement age. Not all pension plans are designed for this!

Your retirement plan might not automatically keep pace with our increased life expectancy. Therefore it's essential to check whether your pension is sufficient to finance your desired lifestyle 22 or more years.

Your income in retirement is usually made up of social security, an employer pension and your own savings and investments. In Switzerland, this corresponds to the three pillars:

1. Pillar: AHV
    
2. Pillar: Employer pension (Pensionskasse / BVG)
    
3. Pillar: private pension, most commonly known as the pillar 3a (and 3b) 
    

We'll take a closer look at all of these later 🙂

How much money you'll have when you retire depends on various factors:

• When you started to put money aside 
   
• How much of it you gave the chance to grow through investing
   
• Your work path and any time out of work or part-time work 
   
• Whether you are married, divorced or in a partnership
   
• Your health and lifestyle

This largely depends on what standard of living you want to have in old age. Your expenses are changing: your mortgage has probably been paid off, you no longer have to raise children and you no longer have any professional expenses, but you may have higher care costs or other hobbies.

Studies show, that the estimated retirement income of the baby boomer generation usually does not correspond to the desired income.

The gender pay gap and different life paths are also reflected in pensions: in 2020, the average pension (BFS, 2020) from the AHV was CHF 1,899 for men and CHF 1,727 for women.

The difference is even bigger when it comes to employer pensions (BVG): here the average new pension for men was CHF 2,600 and for women CHF 1,543, almost 40% less.

These staggering gaps are mostly due to the gender pay gap and the fact that many women work part-time and/or assume caring responsibilities. 

Your pension income will be taxed, similar to your regular income, but you can deduct a lump sum.

How much tax you have to pay depends on your total annual income.

Prices rise over time - but your income in old age should still be sufficient to finance your desired lifestyle. 

State pensions (hopefully) will adjust for inflation, but perhaps not all other incomes that promise fixed payouts.

The good news is that we are living longer and healthier lives. Conversely, this also means that your pension provision must last longer, even though your pensions are taxed and inflation can eat into them.

The good news is that with a few simple things you can avoid pension gaps. Planning for your future in old age now, will help you to secure a comfortable lifestyle in retirement.