Companies may offer early retirement packages when they need to reduce their workforce. To the employee, the decision whether to accept the offer is layered and complex. You can take the offer now, before later rounds of retirement packages become mandatory and less attractive. Or, you can decline the package and hope that future workforce reductions do not occur.
Early retirement can also be unplanned or “forced” due to health issues like a disability or the need to care for a loved one. No matter the circumstances for an offer of early retirement, the employee has much to consider, and much at stake.
Problem is, there is often little time to weigh the options. Usually, the company wants a decision—now. If you are anticipating or evaluating an early retirement offer, consider these key issues, then decide whether it’s right for your situation:
- Take stock of your health insurance. Know exactly what coverage you have now, and find out what it will cost to extend your employer’s group coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act), the federal program that allows families to continue coverage following a major event, including a job loss. Beyond COBRA, explore other options like securing coverage under your spouse’s insurance, buying individual insurance or enrolling in state-sponsored plans. If you at least become familiar with these options, you will be able to make an informed decision more quickly.
- Find out what Social Security benefits you can expect. Social Security can provide a portion of your retirement income, but the monthly amounts vary based on your retirement age. Check out our Social Security calculator that can help you determine what benefits are provided based on your variables like age, income and the amount paid into the program over your working years.
- Review your numbers. Before you decide whether to take an early retirement offer, make sure you take an objective look at your retirement savings accounts, life insurance, cash on hand and the numbers from the Social Security Web site. Track your current expenses, and explore ideas for cutting back on spending to see what your early retirement standard of living might look like.
- Talk to others who’ve gone before you. Seek out friends, colleagues or relatives who took early retirement and learn from their experience. They can help you evaluate your options, but just as important, you will learn valuable lessons from their first-person description of their thought process (even if their situation details have little in common with your own).
- Due to the situation, update your resume. If you’re not sure whether you’re fully retiring at this point, have an updated resume ready so you can pounce on any opportunity that is a good fit. This could also be a good time to explore possibilities like entrepreneurship or contract work, or to build a new skill through education or training that can make you more marketable.
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