An Insight into the Positive and Negative Aspects of Taking Early Retirement
Contemplating an early retirement? Then you need to read the information we will be sharing here before taking a final decision about the same.
There are several positive as well as negative factors you need to analyze to make the right decision and achieve the financial independence you want to have after your retirement. So, let us go through the details here.
Factors to Consider When Thinking of Early Retirement
There are several details you will have to look into (right from financial viability to effect of early retirement on lifestyle) before taking a final decision about whether to retire early or not. Let us delve into the details in the following sections.
Why opt for early retirement?
There are several reasons why you might opt for early retirement. From modifying your lifestyle to health reasons, it would be the right option to select in different scenarios.
However, you will also have to look into downsides of early retirement before actually taking the plunge.
Are there any downsides of taking early retirement?
Few of the negative aspects you need to keep note of include:
• Smaller Pension: As you will be retiring early, it is likely that you will be receiving a smaller pension package in comparison to how much you would receive when you retire after attaining actual retirement age.
• Lesser Likelihood of Getting State Pension: Usually, you will be entitled to receive state pension only when you are in your mid sixties. As such, you may have less income when you opt for early retirement.
Positive Aspects of Taking Early Retirement
Despite the downsides we mentioned in the previous sections, early retirement can still be beneficial for you. Let us see how.
It is possibe that your employer will include certain incentives to make the retirement package attractive such as:
• Increase in Value: Addition of significant lump-sum figure to increase value of defined contribution pension fund.
• Formulation of Pension Benefits: Formulate pension benefits in a way that you get the same benefits as you would in case retirement is taken after retirement age is attained (especially, when defined benefit scheme is implemented).
What are the details you need to analyze before taking a decision?
A few of the details you need to check before deciding about early retirement would include:
• Calculation of Total Income: You will have to calculate total income you will be earning after taking early retirement.
• Estimate of Pension You Qualify For: Additionally, you should request employer to give you an idea of how much pension you will be able to earn if you retire early.
• Payouts with Built-in Increments: In case, payouts are expected out of defined benefit pension plan then it will be important for you to check whether they would be having built-in increment every year.
A Final Note
As we can see, there are positive as well as negative aspects of retiring early. Main thing here will be to analyze your situation and take a decision which will be most appropriate for you.