How to cover an income gap in retirement in Switzerland

What is an income gap in retirement?

When you retire in Switzerland, your main sources of income typically are AHV (state pension) and Pillar 2 (occupational pension). However, for many pensioners, these payments don’t fully cover monthly living costs — leaving a shortfall known as an income gap.

Many pensioners experience an income gap of CHF 2'000 to CHF 5'000, depending on their lifestyle and savings. To maintain financial security and ensure your money lasts, a good strategy is required to bridge this gap — whether through pension withdrawals, investments, or other income sources.

Maximising your pension income

Here are some suggestions that can help you maximise your pension income

AHV & Pillar 2 – Making the right choices

Your AHV and occupational pension form the foundation of your retirement income. How you choose to withdraw your Pillar 2 pension can greatly impact how well you can cover your income gap.

Your options:
- Take it as a monthly pension (Rente) for steady income.
- Withdraw it as a lump sum (Capital) and invest strategically.
- Combine both to balance security and flexibility.

💡 Example: A pensioner with a CHF 800'000 Pillar 2 balance could withdraw part as a lump sum to invest while keeping the rest as a monthly pension to cover fixed expenses.

Pillar 3a – Choose tax-smart withdrawals

If you have pillar 3a savings, staggering withdrawals over multiple years could help reduce taxes and provide an additional income source.

• Avoid withdrawing everything at once to limit the tax impact.
• Consider investing part of your Pillar 3a for continued growth.

Generate income from investments

Your savings should keep working for you even after you retire. Investing wisely can generate returns to supplement your pension income and bridge your income gap.

How to set up a withdrawal plan

A good strategy is to keep a cash buffer for 2–3 years and invest the rest for long-term stability.

Example:

• You need CHF 3'000 per month to cover your income gap.
• Keeping CHF 108'000 in cash (3 years’ worth) ensures security.
• The rest remains invested to generate returns.

Investing without too much risk

To make your money last while keeping risk in check, pensioners can try:
- ETF-based portfolios for diversification.
- Dividend-paying investments for passive income.
- Bonds for stability.

💡 Tip: A well-diversified, automated investment strategy helps balance growth and security — ensuring your savings last throughout retirement. Selma can help you with setting up your personalised investment strategy and ETF-based, well diversified portfolio. 

Alternative income sources

Rental income from property

If you own real estate, renting out part of your home or a separate property can provide a steady income.

Part-time work or freelancing

Many pensioners take on part-time work or consulting to supplement their pension income without committing to a full-time job.

The key to a worry-free pension 

Covering your income gap doesn’t have to be stressful. A smart combination of pension planning, investments, and alternative income sources can help you maintain financial security while enjoying retirement.

Remember: 

• Keep enough cash for short-term needs
• Invest wisely to generate long-term returns
• Use a structured withdrawal plan to avoid running out of money

Looking for an easy way to manage and invest your retirement money? 

Selma helps pensioners and “pensioners to be” invest strategically and bridge their income gap — while keeping full flexibility and security. 💙

Would you like to explore your options? Learn more about Selma here.