August 16, 2013   Retirement Planning

Should I Accept an Early Retirement Offer?

early retirement While many workers dream of an early retirement, the decision to take an early retirement offered to you is a large decision that should not be taken lightly. There are both financial and emotional considerations that must be made.
Many people may not realize that there is a psychological impact of early retirement. If a person is not ready to transition from working a full-time job to experiencing a more leisurely schedule, he or she may find the adjustment difficult. People who have trouble with the transition may experience anxiety, along with other mental health problems. Therefore, before you consider the financial aspect of an early retirement, consider whether you are psychologically ready.
If you believe that you are psychologically ready for an early retirement, the next step is to break down the offer you were given in order to determine whether it is worthwhile. Importantly, consider whether your offer provides a severance package and post-retirement medical insurance.
If your offer includes a severance package, compare that severance package to the earnings you would make if you stay employed. Factor in any anticipated bonuses and raises in these calculations. Determine whether you can live on the severance package until you reach your full retirement age. If you cannot live on your anticipated severance package, consider whether you have enough money in your retirement fund that you will not be adversely impacted if you need to begin withdrawing from it early. Also, remember that Medicare coverage does not begin until a person turns 65, so it is important that you have coverage that will last between your retirement and your 65th birthday.

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