Pros and cons of early retirement

Every retiree bears the risk of outliving his or her retirement savings, especially if he or she doesn’t manage to plan for retirement in a proper way. The early retirement benefit is payable to every person whose age on separation is 55 years (at least). This early retirement benefit is less than the pension for the normal retirement age. In order to receive the early retirement benefits, you must have been in service with your employer for 5 years or even longer. An employee becomes eligible for his or her retirement benefits in the month when he or she reaches 62. The first payment will be received the following month.

However, if you want to take an early retirement and decide to start the retirement benefits early, you must know that these benefits will be reduced. They will be reduced with a fraction of a certain percent for every month that is prior to the full retirement age. If you decide to take the early retirement benefits, you will get almost the same total social security benefits. But they are likely to come in smaller amounts because you will be receiving these benefits for a longer period of time.

There are some disadvantages as well as advantages to taking your early retirement benefits. One of the greatest advantage related to this kind of retirement benefits is that you will be collecting them for a much longer period of time. But the downside to this advantage is that these benefits will be reduced because they have to cover you for a much longer period of time. Keep in mind that if you want to start receiving your retirement benefits earlier, these benefits will be reduced based on the exact number of months before you reach the full retirement age. For instance, if your own retirement age is 65 and you want to retire at 61, your early retirement benefits will be subjected to a reduction of 15%.

You can use the available online calculators in order to decide whether an early retirement is a wise step for you to make or not. An early retiree is considered to have a higher life expectancy. This means that much is likely to happen to his or her retirement savings in this period. The mix of taxation and inflation can significantly erode one's retirement income and savings. An earlier retiree's regular income may not keep the pace with his or her living expenses and this could happen in the latter phases of retirement.

The income risk will be increased in a significant way and this is one of the cons when it comes to retiring earlier. Another con of early retirement is that some of the retirement benefits will not be available. Even if these benefits were available, the early retiree will receive a lower benefit because his or her life expectancy is longer. Age is a quite significant factor in your retiree decision because it can affect your tax burden, defined benefit and even the annuity benefits. The low availability of early retirement income is a critical, but surmountable problem.          


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