Clark County Credit Union (Las Vegas, NV)

Pros and Cons of Considering an Early Retirement Offer

For most people, getting out of the 9 to 5 grind early is a dream come true. Of course, early retirement offers should be given careful consideration before accepting. If an offer has been made to you, here is a list of pros and cons to help you make the right decision.

What to Look For

Before you start weighing the benefits of accepting an early retirement offer, sift through the details for these elements:

  • Severance Payments. This figure is usually based on your current salary and how long you've worked for the company. Some payments are offered as a lump sum or are paid out over several years. Your employer may consider a severance payment as "deferred compensation," so you'll want to make sure a tax professional has a look at the arrangement, so you can discuss any income tax implications.
  • Medical Coverage. Retiring early often means retiring before you'll be eligible for Medicare. Medical costs can rack up pretty quickly without any insurance coverage, so you'll want to see what coverage your employer is offering and how much of the premiums you may be responsible for.
  • Bridging. Some retirement offers come in the form of a bridge payment, or temporary benefits meant to bridge the gap between your retirement date and your eligibility for Medicare and Social Security. 

The Pros and Cons

The most important consideration of an early retirement offer is the fact you'll no longer be drawing your same salary. In other words, you'll have to live off of the early retirement offer and your savings. Depending on the size of your proposal, you may have to dip into your retirement savings rather than adding to them, and this could impact your long-term plans. In some cases, the amount of your pension or other retirement payments may also be lower as you'll be paying into them for a shorter period.

If you're thinking about turning down the offer, be sure to consider the ability of the company to maintain your employment. In many cases, early retirement offers are made to loyal employees in lieu of layoffs or other downsizing methods. Accepting an early retirement offer can help you avoid a more uncomfortable fate.

One of the biggest pros of an early retirement offer is many of them do not stipulate you must retire. If you planned on working for several more years, you can find another position, and enjoy the added income. Or, if you are feeling more adventurous, you can use the security of guaranteed income to launch your own business or turn to a more relaxed position as a consultant.

Planning for Your Future

No matter which decision you reach, it pays to make sure you've explored all the options and implications of your early retirement offer. Visit Banzai for free tools and services to aid in your planning. For more information, contact Clark County Credit Union 702-228-2228 today!

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