What to Do If You Are Offered an Early Retirement Pension

You can make an early retirement work.
You can make an early retirement work. (Image: Jupiterimages/BananaStock/Getty Images)

When companies need to trim their budgets and their workforces, they often offer senior employees the chance to retire early. The value of these early retirement packages varies widely, and it is important to assess a number of factors before you decide to take that package and walk away from your career.

Research Your Health Insurance Options

The cost of health insurance is likely to be one of your largest expenses if you plan to retire early. Depending on your age, you might not be eligible for Medicare for a decade or more, and that can mean years of increasing health care premiums. Before you accept any early retirement package, you should thoroughly research the cost of an individual health insurance plan. You can start your search at the website run by the National Association of Health Underwriters. There you can find links to local agents who can help you find the most affordable coverage for your needs.

Polish Your Resume

If you are not yet ready to call it a career, you can look beyond your retirement package to your next employment opportunities. If the skills you have are in high demand, you might be able to start a new career, giving you years more in retirement savings and helping you stretch your nest egg further when you finally do retire. If it has been some time since you last updated your resume, update it with the additional years of training and experience you have gathered. Then start networking with others in your field to find out about possible job opportunities.

Check Your Retirement Savings

The more you already have saved for retirement, the greater your flexibility when it comes to accepting an offer of early retirement. Even if you are not yet age 59 1/2, you can use the 72t provision to pull some money from your 401k, IRA and other retirement accounts. The 72t provision is designed to help younger workers access the money in their retirement accounts, making it easier for early retirees to make ends meet before they are eligible for Social Security and pension payments. If you opt for this provision, you can withdraw money without a penalty, using a formula based on your age, the balance in the account and your life expectancy. Once you start making withdrawals under the 72t provision, you must continue for five years, or until you turn 59 1/2, whichever is longer.

Assess Your Personal Savings

If you have significant personal savings, you might be able to take that early retirement offer without dipping into your retirement portfolio. You can use the money you have saved in personal accounts, including funds in low yielding money market accounts, to supplement the income from your early retirement package. This strategy gives your retirement assets more time to grow and reduces the likelihood that you will run out of money.

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