RETIREMENT

What Is The Grand Plan

Some people dream of buying a boat when they retire, while others are content to spend their days on the golf course. Still, others want to travel the world. Before you get too far ahead of yourself in thinking about how you will save for retirement, you need a goal. It’s thus crucial to first decide what you’ll want to do in retirement. Once you know what your dream is, then you can begin making it happen. For example, if your dream is to wake up in the morning and hit the open water to sail, it makes sense to determine what it entails. What capital do you need to buy the boat of your dreams? Will you be island hopping during the summer in the Greek islands or just competing down the local sail club. What access to the water will you need? Will this mean a house move is likely?

Similarly, if your dream is to travel the world, you are going to want to live in close proximity to an airport (or seaport if you prefer to cruise). You’ll also want to make sure that there are no other obstacles that will affect your plans. By deciding what your dream life after retirement would look like, you can shape the rest of your plans to make it work.

1. How do I retire?
2. When can I retire?
3. How much money do I need to retire?
4. How much will I spend in retirement?
5. Should I retire early?
6. When should I take Social Security?
7. How do I apply for Social Security benefits?
8. How much will I pay in taxes in retirement?
9. Should I take my pension as an annuity or a lump sum?
10. How will I afford medical expenses in retirement?
11. Should I pay off my mortgage before retirement?
12. Should I move in retirement?
13. Should I sell my home in retirement?
14. How should my money be invested once I retire?
15. What happens to my assets on my death?

Leaving the workplace may be as simple as filling out paperwork with your human resources office, but replacing your salary is likely going to be more difficult. The No. 1 question we hear from people thinking about retirement is: “Logistically, how am I going to make this happen?” People want to know about how to move from the steady income of the workplace to living off their retirement savings. The answer is usually found by sitting down with a finance professional and determining how much to pull out of retirement savings and on what schedule. This is where we can help. Make sure your twilight years bring you what you want. You worked hard for them!
Find out exactly what all this means for you personally.

You can retire when you can afford to do so. However, in reality, people may have many constraints or commitments that need to be filled before they can leave the workforce. For instance, some employees may have to work to a certain age to avoid early retirement penalties from their company pension. Those who need State pension income to retire can’t begin collecting benefits until age 65 for men and 64 for women – or even later in some countries. You may have young children going through school and university and expenses are too high to commit to an early retirement. Each family has different priorities. Ensuring you have thought about your timeline for retirement and have sufficient liquidity for pre and post retirement events, you can take the plunge.

If you want to sound board your ideas and get advice from the professionals, we’ve planned for the seen and for the unseen events in retirement. We make sure you know the retirement timeline and save you from those nasty surprises.
Find out exactly what all this means for you personally.

It’s great to have goals, dreams, and ambitions, but, frankly, they don’t mean a thing if you lack the financial means to fulfil them. Rather than living on hope, it’s best to do some soul-searching to determine what your future expenses will be and whether you will have enough money to live comfortably and actually enjoy your retirement years.

We like to think of the money needed in two specific pension pots:
What do I need to survive? Think about your survival costs: Shelter, food, warmth, connectivity.
and what do I need to thrive? Think about the hobbies you want to take up, travel, gifts, holiday homes.

Financial planners have been arguing for decades over how much money the average person or couple needs upon retirement. Some say that in order to maintain your lifestyle, you’ll need 60% to 80% of your pre-retirement income annually. However, many of those estimates are just that—estimates. It all depends on what you plan to spend in retirement…
Find out exactly what all this means for you personally.

To determine how much you need to retire, you need to understand how much you’ll spend. Fortunately, that’s not as hard to calculate as it might seem. We can use your current spending habits and extrapolate using expected inflation and life expectancy to determine how much you will reasonably need in retirement.

You can also think about what is needed as a regular income to cover your survival costs + regular thriving costs. It may be that you have irregular capital expenditure too (Children’s weddings, housing ladder help, grandchildren’s education costs) that needs to be built in to the calculation. Most important is the timeline and thinking about when you’ll actually need the money, and if your spending will likely increase or decrease. For example if you’re an avid traveller, it’s unlikely you’ll be able to travel at the same pace in your 80’s as in your 60’s. Think about the active period and the passive period of retirement. You’re income needs might change and if you plan for this, you can ensure your assets are structured sensibly for the retirement you want… They may even stretch further than first thought.
Find out exactly what all this means for you personally.

If you want to, why not? No one can answer that but you. We can run through a number of different what-if scenarios to help you determine the best time to retire from a financial perspective. These scenarios can consider whether retiring early could lead to a shortfall of money later. Usually it’s a compromise. Unless you’ve been super successful and a diligent saver, you may need to consider a less extravagant lifestyle – but if you’re prepared to live off the grid and be self-sufficient – why not!
Find out exactly what all this means for you personally.

The current ages for entitlement to the Swiss State Pension are 65 for a man and 64 for a woman. Be aware that the amount of state pension for married couples cannot by law be more than 150% of an individual pension. This means the individual pensions are reduced.

We have the option to advance payment of the State Pension by two years or defer it by up to five years. Be aware early retirement leads to reduction in payment and deferral is rewarded with higher pension. An application needs to be submitted for both early retirement and deferral of taking your pension. Find out exactly what all this means for you personally.

Your entitlement begins on the first day of the month after you reach ordinary retirement age. To ensure you are entitled to your Swiss State Pension you need to have a minimum of one full year of contribution credits. Once full year of contributions will be credited if:

• You have paid contributions for one year in total or
• Your working spouse has paid twice the minimum contribution for at least one year or
• You are entitled to parental or care credits.

Submit your application for your pension roughly three to four months before retirement age as it may take the compensation office some time to obtain the necessary documents and calculate the amount of your pension. Applications can be obtained from the OASI offices or from the OASI website.

Switzerland has relatively low tax rates, which can make your pension income go a bit further. But it’s important to understand the Swiss tax system and the tax system in other countries where you may have pension funds. For Swiss residents, you must declare your worldwide assets subject to Swiss taxes. Switzerland recognises pension income as taxable income. The tax rate depends on the canton and the sum of pension income. Switzerland has a number of agreements with many countries that prevent double taxes on pensions. In this case, taxes only apply in the country of residence.

Retirees in Switzerland may also be subject to other Swiss taxes, such gift taxes and taxes on wealth and assets; although, much of this depends on the canton. On death, the transfer of wealth through inheritance is tax-free to spouses in all cantons. This is usually also the case with offspring and direct ancestors, but make sure you know who will benefit from your assets on your death, it might not be the structure you intended.

It’s important to understand the tax you’ll pay, and the social benefits you’ll receive for the tax paid, as this will directly affect your income and potential expenses. Low tax countries usually put the emphasis on you to pay for the services you want.
Find out exactly what all this means for you personally.

If you’re built up a large sum of money in your pension plan, it’s important to analyse both pay-out options before choosing the lump sum or annuity. While an annuity may offer more financial security over a longer period of time, you can invest a lump sum, which could offer you more money down the road. Take the time to weigh your options, and choose the one that’s best for your financial situation. Before deciding, you need to look at the pros and cons of both instances:

Lump Sum Payment
If you have large debts, you can pay them off quickly
You can pass on whatever is left of the lump sum as an inheritance
You can invest large amounts of the money sooner
Your retirement money could run out before you die if not managed properly

Annuity
You will have an income for the rest of your life
You may be able to pass this lifetime income on to your spouse or a different beneficiary
Annuities might give you less financial flexibility in life
You may die before ultimately collecting all of the retirement money you’re owed
Some annuities may not pay benefits to your family or beneficiaries in death

After weighing the pros and cons, you should analyse your own situation. A simple analysis compares the monthly payment amount offered with what you believe you could generate by investing this lump sum at about the same risk level. There are four factors to consider with this analysis: life expectancy, capacity for loss, return on investments and risk of return.

Life Expectancy
If you’re healthy, or have a good reason to believe that you or your spouse will live beyond the average life expectancy, monthly payments might be more attractive to you. If your spouse is significantly younger than you, that also might play a role in your decision. However, if you’re in poor health and don’t expect to live beyond the average life expectancy, or you retired later in life, you may get more out of the lump-sum option. You can leave a lump sum for your heirs. And while managing that lump sum, it may be smart to overestimate how long you will live. Running out of money at 95 because you thought you would only live to 80 is not a fun prospect.

Capacity for Loss
If you already have a sufficient retirement income – whether through Social Security benefits, other existing annuities or other forms of lifetime income – you could take the lump sum and invest the money for yourself. If this pension is your only source of income, can you afford to take the risk?

Return on Investments
This all depends on how the money is invested and how long you live. What is the critical yield i.e. the return you need to match the annuity benefits given up. With this figure you can assess how likely it is you will achieve this return over specific periods.

Risk of Return
If you are concerned about the reliability of your retirement income, you might want to take the annuity for the security. If a lot of your retirement income is dependent upon the market rather than guaranteed, the security might be a better bet for retaining a certain minimum lifestyle. If your annuity does not have a cost-of-living adjustment, it’s purchasing power will decrease over time due to inflation. You can invest a lump sum in low-risk stocks, bonds or securities to help your assets keep up with inflation. However, doing so involves taking on some risk, and it doesn’t mean your income will last for the rest of your life.

Switzerland is renowned for offering world-class healthcare, which is an attractive offering for international professionals retiring in Switzerland. However, this exceptional Swiss healthcare comes at the expense of compulsory Swiss health insurance, required for all official Swiss residents.

Monthly payments are based among other aspects on your age and the annual deductible amount i.e. the medical expenses you will cover fully initially before the insurance kicks in. The older you are and the less the annual deductible, the more your premiums will be. Swiss health insurance also includes a retention fee, whereby the individual must contribute 10% towards the insurer’s cost, capped at CHF 700 for adults and CHF 350 for children per year. The prices of Swiss health insurance varies widely. You can also purchase supplementary health insurance that may cover you for treatments that aren’t included in the basic health insurance. In addition to health insurance, all Swiss residents must have accident insurance to cover medical costs in the eventuality of an occupational or non-occupational accident. Employees typically get coverage from their employer but for non-working individuals, you must take out a personal insurance policy and pay a monthly premium or add it as a supplement to a private insurance plan.

Retirement outside of Switzerland may reduce medical expenses considerably.
Find out exactly what all this means for you personally.

For those who own property, a mortgage interest may reduce your taxes. If the interest rate is low enough, it may also make more financial sense to invest money rather than pay off the debt. However, it comes down to personal preference. It’s important to balance the hard math with what allows you to sleep at night.

Moreover, retirees need to consider how paying off a mortgage could impact their ability to live comfortably in retirement. It’s a good thing to go into retirement without debt but you need to make sure it makes sense to rob a pension of a few hundred thousand to pay off a house first.
Find out exactly what all this means for you personally.

People who are expecting to retire within the next few years should consider making a move to a more suitable location for the future. There are a number of factors that should be considered when picking a new place to live. For example: If you think this will be the case for you, perhaps you might want to consider joining the flock and moving to a warmer climate, even if it doesn’t address some of the other factors mentioned above.
Find out exactly what all this means for you personally.

Most retirement planners focus on an individual’s investment portfolio. The portfolio is important, but it’s often not a person’s most valuable asset or largest potential source of liquidity. The bulk of many people’s wealth is tied up in their homes. As people approach retirement age, they should consider selling their residences, or releasing some equity, particularly if the mortgage has been satisfied and the property has increased significantly in value.

Why sell? First of all, you’ll generally need less space, and a smaller home is easier to maintain. However, that’s not the primary reason. The main reason to sell is to gain liquidity and make sure that you have enough cash to live on and establish an emergency fund. After all, what good does sitting on a valuable home do if you don’t have the money to buy adequate health insurance or do the things you enjoy? Ideally, people approaching retirement should try to figure out if it makes sense to sell the family home now and rent a home for a couple of years until retiring, or if it makes better sense to hold onto the home until the date they actually bid the workplace “au revoir”. The decision can be crucial. Just think about what happened to those who waited to sell their homes until after the housing bubble burst in 2008.
Find out exactly what all this means for you personally.

Since retirees may be living off their savings, that money needs to be protected in case of a recession or market downturn. We should be more conservative in retirement. However, retirement savings also need to earn enough gains to keep up with inflation and provide a decent level of income. A financial advisor should be able to recommend the right mix of bonds, equities and other investments to keep some money safe while allowing a portion of the portfolio to grow.

The most important aspect is to ensure all bases are covered. Make sure your survival income is fixed and you have a sufficient emergency fund to stop drawing an income from your other assets in times of market downturns. Avoiding drawing an income when asset prices have fallen is essential to protecting the value of your funds and drawing a sustainable income for the remainder of your lifetime. Understanding the retirement timeline and likely events where larger drawdowns are required is prudent. The better the timeline, the firmer the objectives, the more predictable the outcome.
Find out exactly what all this means for you personally.

In order to ensure that your assets are properly transferred to your heir, and in order to minimise estate taxes, it makes sense to do some estate planning. Particularly if you have assets in multiple jurisdictions as there is a lot to consider. As unpleasant (and dull) as the thought might be, it’s important to sit down with Estate planning professionals to determine the most cost-effective way for your estate to get delivered to beneficiaries upon your death.

For starters, you need a will. But that might be just the beginning. The best approach might also entail setting up a trust and/or custodial accounts for children or grandchildren.
Find out exactly what all this means for you personally.

Take some time to plan for your own care—and that of your spouse, if you’re married—as you get closer to the risks of advanced age. Set up powers of attorney, and other documents well before you need them when you can thoughtfully consider your needs and preferences.

Don’t leave these crucial decisions until there is an emergency when your energy and abilities may be compromised. Others could end up making choices that would not have been your preferences. Get there first and arrange your own life.