Financial downsides of early retirement

I’m trying to capture all the different elements and gotchas that impact someone looking to retire early in Switzerland.

  • Need to pay AHV based on wealth (around 0.2-0.3%)
  • Wealth taxes can make effective tax rate very high
  • No longer able to pay into Pillar 2 and Pillar 3a
  • No longer able to claim child and family credit
  • No deduction for daycare costs
  • No ‘free’ accident insurance from work
  • Lose various deductions relating to work from tax calculation
  • May get kicked out of occupational pension scheme losing the guaranteed pension and instead receiving a lump sum

Please let me know if I missed anything!


Maybe you can rename the thread to ‘Financial’ downsides of early retirement for more clarity ?

Can you explicit this? Do you mean you can no longer get tax rebates for children?

I updated, but since this is a Finance forum, I thought that already goes without saying.

This is a consequence of being wealthy, and not directly related to early retirement. With exception maybe that from age 60+ lump sum withdrawals from 2nd accounts add to wealth, where otherwise people might opt to have a pension instead. Maybe add this then to the list: early retirement might limit 2nd pillar options to draw on pension instead of lump sum?

These are all deductions from income for taxation purposes. Since you don’t have an income, other than some dividends I guess, you shouldn’t have high taxes to worry about. I wouldn’t list those.

Additional ones to consider:

  • Loss of unemployment insurance once out of the workforce for more than one year. In case finances don’t go your way and a return to work is necessary…
  • Not directly a financial downside, but maybe a consideration if not a home owner: Finding a new apartment might be difficult if not in employment.
  • If a home owner: Maybe there is a risk that the mortgage provider wants to reassess your ‘Tragbarkeit’?

See here: Child Benefits in Switzerland Explained -

I think you are still eligible for those, but you will need to apply somewhere at the place of residence instead of it automatically paid through your employer.

Yes, this is an important one I forgot to include!

It is not just the tax deduction e.g. the inability to shift wealth into tax sheltered Pillars will mean constant tax drag for the rest of your life.

Child credit is is a straight up loss of an allowance.

Deduction for daycare. Fine - you’re retired so probably don’t have daycare costs any more.

Other tax deductions do add up!

I thought you meant tax deductions with this. The monthly 200 CHF child allowance (depending on canton) you are still eligible to. From your link above:

If you do not earn at least 7350 francs per year from one employer or self-employment, and are not entitled to unemployment insurance benefits, then you can claim family allowances from the social security office of the canton which you live in. In most cantons, you can only claim these family allowances if your income falls below a limit set by the canton. Geneva, Jura, and Ticino do not have any income limits for claiming child benefits.

If you live in Zürich, you would apply here:


Yes, there are certain situations where you can get it if you are unemployed but with low income.

AHV rules are here (Non-employed contributions to OASI, DI, and IC), indeed it makes at most roughly 0.3% of your wealth + 20 times any pension income till you turn 65:

One possible workaround to avoid those contributions is some sort of ‘barista FIRE’ where you are either employed at 50% for the whole year, or self-employed and earning enough to make the minimum contribution of 514 CHF / year.

Pension fund: it depends on age. The early retirement age is 58 or 60 (depends on the pension regulation), you can only draw a pension if you retire while being employed at of after that age. If instead you quit your job (at any age), the whole pension fund amount is moved to a vested account (Freizügigkeitskonto). You have the option to split it into two accounts (and you should, so you can cash each account on different years but only if you leave before 58) and invest it (e.g. with FinPension or VIAC). And you will have to cash it in between 60 and 70 (65 starting 2024, unless you are still working).

Depending on your pension fund amount and the canton you live, moving to one of the cantons with lower capital withdrawal tax could be an option. See

Starting 2022, if you get fired after 58, you can chose to remain affiliated with the pension fund.

An upside is you can self select how your Pillar 2 Vested Benefits is invested and you keep any gains or losses for yourself


That’s true. I guess after many years of subsidizing the already retired with unsustainable pension rates and not benefiting from this yourself, I guess you can take comfort in whatever remains for you is yours! :wink:

Do you have wealth that does not derive from income?

I’m confused by some points on your list. Usually, early retirement means you want to give up working and income, and therefore income-related benefits. Can’t have both, can you?

No. Retirement means that you stop working.

When you stop working, you still might want to move assets from taxable accounts into non-taxable 3a accounts.

When you stop working you might still have income e.g. rental income, royalties, interest. So giving up working doesn’t mean giving up income at all!

Now I see you point - makes sense, yes, but it’s only deferred taxation, not zero taxation. Whether you retire earlier or not, you’ll be paying your taxes.

Can you somehow self-employ yourself so that you continue to contribute to the AHV via a salary (you pay to yourself) instead of based on your wealth?

E.g. if you invest via your own company (most likely in ETFs) and hire yourself, something like that?

Yes, though:

  1. Then you are not retired any more; and
  2. You have to earn a minimum amount (otherwise you pay AHV based on wealth anyway and get a credit for the AHV you pay from employement/self-employment)

Judging by all the various FIRE bloggers, nobody actually retires in their mid thirties anyway. They all do stuff, just… different stuff.

  1. Well you’re not retired on paper, but I don’t think anything constrains you to show up in a random office from 9 to 5, is there? So in practice what does that change?
  2. I guess you could create your own small company which would invest your own assets (hold some of your ETFs), then pay yourself a salary, basically from your own pocket

I don’t know if any of this makes sense, I just don’t see why not do that. Maybe you’d end up paying more on other taxes in most cases? But not if you’ve managed to reach a very high wealth?