How Can You Assess Early Retirement Incentive?

When the economy took a downturn many businesses offered their employees an early retirement incentive as a way to reduce payroll costs.

The reason they did this is because in the long run it is less expensive to pay employees to retire than to continue to pay them their regular wages.

If you should find yourself in this situation, you need to take some time to evaluate the early retirement incentive to be sure that it is the right thing for you to do.

You can't afford to let the idea of an early retirement cloud your better judgment.

The first thing you need to figure out is whether you will have a job if you turn down the offer.

If the company you work for is on shaky enough ground, it is possible that you will be terminated shortly. Early retirement may be your safest option.

If you truly do have a choice, then you should start to take a close look at your financial situation. You may have been planning on not retiring for several more years. Your retirement account may not be as large as you had planned. You may need a few more years to build it.

If that is the case you need to assess whether or not to continue working or to take the early retirement incentive and find other ways to generate some income. This could mean taking on another job, or maybe even starting your own business.

In addition to the size of your retirement account, you need to consider what taking early retirement means to your pension. Some plans are based on the last several years you worked. It could be that retiring early will mean lower pension payments in the future.

One important factor to remember is that part of your retirement money will not be available to you before you reach your full retirement age. If you withdraw from your 401K plan you will get socked with a big tax payment. You will lose almost half of the money you withdraw.

There is an option to take early retirement from Social Security, but that lowers your payments later. The more money you take out, the less there will be available later on. You need to find ways to pay your bills without tapping into these funds.

You also need to take a close look at the overall shape of your finances. If you have debt that you were hoping to get paid off before you retired you will need to factor that into the decision. Higher debt means higher interest payments, and less available for living expenses.

There are additional expenses you need to look at when making your determination. Is the company going to be extending your healthcare benefits? If they are not you are going to need to find that coverage on your own. That is a big expense that could quickly drain your retirement fund.

Before you fall in love with the idea of walking away from it all you need to assess the quality of the early retirement incentive offer. If the offer is good, and you can afford to quit your current position, then do what you would like to do.

If you need more time to get ready you will need to either refuse the offer or find another way to earn money. With a little effort and creativity you will be able to replace the income you gave up and enjoy the life of a retiree.

Again, this is why I suggest you build multiple streams of income into your life, such as real estate investments, network marketing, niche websites, etc.