What retiring early actually costs
The four separate costs of stopping work before the reference age: a permanently lower AHV, a smaller pension-fund pension, the years you must self-fund, and contributions you still owe.
In one line: Early retirement has four distinct costs, not one — and three of them last for the rest of your life.
Stopping work before the reference age of 65 is a normal, achievable plan. It is also more expensive than most people expect, because the costs arrive in four separate places and only one of them is obvious.
Cost 1: the years you have to fund yourself
The visible one. Between the day you stop earning and the day pensions start, your entire cost of living comes out of your own capital.
This is straightforward arithmetic — annual spending multiplied by the number of years — and it is usually the item people do plan for. Note that the bridge is longer than it looks if you draw your pension fund at, say, 60 but defer the AHV.
Cost 2: a permanently lower AHV
If you draw the AHV before the reference age, the pension is reduced — and the reduction is permanent. It does not stop when you reach 65; it applies for as long as the pension is paid.
Across the full range from early drawing to deferral, the adjustment runs from roughly −6.8% to +31.5%. Over a retirement of twenty or thirty years, a percentage reduction on every single payment compounds into a large absolute number, which is why this cost is consistently underestimated.
Cost 3: a smaller pension-fund pension, from two directions
Leaving early hits Pillar 2 twice over:
- Fewer contribution years, and the most valuable ones. Retirement credits rise with age, reaching 18% of insured salary from 55. The final decade builds the balance fastest, so those are precisely the years being given up.
- A lower conversion rate. Funds generally apply a reduced conversion rate for early retirement, because the capital has to last longer. So a smaller balance is also converted less generously.
The two effects multiply rather than add, which is why the pension shortfall is often larger than the missing salary years alone would suggest.
Cost 4: contributions you still owe
This is the one that catches people out. If you stop all gainful activity before the reference age, you remain subject to AHV as a person without gainful activity and must continue contributing until 65.
The amount is assessed on your wealth and pension income, so it can be substantial precisely for the people most able to retire early. Skipping it does not save money — it creates a contribution gap that reduces the AHV pension further, permanently.
Putting it together
The capital you need is the sum of four things: the years to bridge, the lifetime value of the AHV reduction, the lifetime value of the pension shortfall, and the transitional contributions.
Two levers work against those costs. Voluntary pension-fund buy-ins in the years before departure raise the balance and reduce taxable income while you are still earning well. Staggering the withdrawals that fund the bridge across several tax years reduces the one-off capital-withdrawal tax, since that tax is progressive and same-year withdrawals are combined.
Because all four costs depend on your canton, your fund's rules and your own numbers, the only meaningful answer comes from testing several departure ages against your actual situation.
Common questions
How much does the AHV drop if I draw it early?
The pension is permanently reduced. Across the full early-to-deferred range the adjustment spans roughly −6.8% to +31.5%, and the reduction applies for life rather than only during the early years.
Does early retirement also reduce my pension-fund pension?
Yes, twice: fewer years of the highest retirement credits, and a lower conversion rate applied to a smaller balance.
Do I still pay AHV after I stop working?
Yes, as a person without gainful activity, until the reference age. The amount is assessed on your wealth and pension income, and skipping it creates a gap that lowers your future pension.
How much capital do I need?
The years to bridge, plus the lifetime cost of the reduced AHV, plus the pension shortfall, plus transitional contributions. The number is specific to your canton, your fund and your spending, so it has to be calculated rather than estimated.
Sources: AHVG (SR 831.10) Art. 40 (early drawing and deferral) and Art. 10 with AHVV (SR 831.101) Art. 28–30 (contributions of persons without gainful activity); BVG (SR 831.40) Art. 13 (early retirement) and Art. 14–16 (retirement credits and conversion rate), together with your pension fund's own regulations; Federal Social Insurance Office (BSV).
Educational information, not financial advice. Figures are for 2026 and may change.