If you're five years from your retirement age you may be presented an early retirement package - i.e. an offer of money in substitution for retiring at an earlier retirement age than you had projected. What should you consider before choosing to accept it?
You have to look at your economic condition, your family's needs, and whether or not you've enough money to invest to support an early retirement.
The problems of concern are:
• Analyzing your retirement strategy and pension plan and 401k plan balances
• Keeping insurance for health and life insurance coverage, if needed
• generating sufficient revenue, possibly form a new work endeavor or retirement job
The early retirement plan and retirement age.
Your company's retirement plan manager must provide a written explanation of your choices for the 401k program and pension plan thirty to 90 days before the final date on which you must take action on an early retirement offer. The explanation must make it clear when you can begin receiving plan advantages, what is the right retirement age, what form benefits take, and what would be the implications of starting benefits early. It's essential that you have that in hand before you visit a retirement advisor.
Health insurance coverage
Find out in case your employer offers any permanent health insurance coverage for your retirement years. If that's the case, just how much will it cost you? Employer-supplied insurance plan may end around the day you're laid off or just after and this is a prime reason many do not opt for early retirement. They desire to retain their health advantages. By U.S. legislation, the Consolidated Omnibus Budget Reconciliation Act (COBRA) lets you continue your present coverage, which includes physician services, hospital, dental, vision along with other health care expenses, at group prices plus a small administration fee. Nevertheless, that beneficial rate is only assured for 18 months. You've a limited time for you to decide to accept COBRA coverage before the decisions window lapses.
How will you create retirement income? Will you be eligible for a unemployment advantages - and if that's the case, how long will you need to wait before qualifying and how long will you get benefits? Determine other choices to work for the duration.
Is it a part of your company benefits? Life insurance isn't provided under COBRA. However your ex-employer might pay it for a month or more as part of your severance pay and benefits, and then offer a continuation option. It usually isn't expensive if you're in good health. You may be able to uncover a much better deal outside the business in the event you still need protection as one cost that has decreased over time is life insurance protection. But as with health insurance, new private plans might not cover you for previous or existing situations. Examine them thoroughly, prior to declining your ex-employer's offer. This is another reason which can make early retirement might look less rosy-if you are un-insurable for new coverage but may continue under the employer provided life insurance you already have.
Last, do not disregard the mental elements of early retirement age. Whilst some may jump at the opportunity to spend more time on the golf course or fishing at the lake, others have their social life and perception of personal worth linked to their work.