If you are 5 years from retirement you might be offered an early retirement deal - i.e. an offer of cash in substitution for retiring at an earlier retirement age than you had scheduled. What should you consider before choosing to accept it?
You must look at your economic condition, your family's needs, and whether or not you have enough cash to invest in an early retirement.
The problems of interest are:
• Evaluating your retirement plan and pension strategy and 401k issues
• Keeping insurance coverage for health and life insurance
• Generating revenue for the duration
The early retirement plan and qualified plan issues.
Your company's plan manager must offer a written explanation of your options for your 401k program and pension plan thirty to 90 days before the final date on which you must take action. Make it clear when you could start receiving plan advantages, what form they take, and what would be the consequences of beginning advantages early. It's essential that you have that in hand whenever you go to your retirement advisor.
Health insurance coverage
Find out in case your employer provides any long term health insurance for the retirement years. If so, how much does it value? Employer-provided coverage might end around the day you're laid off or right after and this really is a prime cause numerous do not opt for early retirement. They desire to retain their health benefits. By U.S. legislation, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your present coverage, which includes certified physician, hospital, dental, vision along with other healthcare costs, at group prices plus a small administration fee. Nevertheless, that advantageous rate is only guaranteed for 18 months. You've a limited time for you to elect COBRA coverage before it lapses.
Life Insurance coverage
Is it part of your company benefits? Insurance coverage isn't supplied under COBRA. But your ex-employer might pay it for a month or more as a part of your severance pay and benefits, and then offer a continuance option. It usually isn't inexpensive either; and also you may be able to find a much better package outside the company if you still require protection. But as with health insurance, new private plans may not cover you for previous or existing situations. Investigate them thoroughly, prior to you refuse your ex-employer's strategy. This is another reason that early retirement might appear less rosy-if you're uninsurable for brand new coverage but may continue to the employer supplied life insurance you already have.
How would you create retirement income? Will you qualify for unemployment benefits - and if that's the case, how long will you should wait before qualifying and how long will you get benefits? Determine other choices to work for the duration.
Last, don't disregard the mental elements of early retirement. While some might jump at the opportunity to invest more time on the golf course or fishing at the lake, others have their social interaction linked in with their work.