Incentives to Retire Early

With the current recession, retiring early is probably not being considered as frequently as in the past. However, as companies continue to cut back, there are often incentives given for people to retire early, which may increase people's interest in retiring early.

Here are some of the incentives of which I am aware:

Severance pay. Typically, severance pay is based on the years of service. For many people near retirement, this means about one year of severance. I have heard of some companies offering two years, and I seen a Japanese company offer four years severance.

Extension of employee benefits. Some companies will offer continuation of benefits, e.g health and life insurance, at employee rates for a time period equal to that of the severance pay.

Full retirement benefits before normal eligibility. In some cases, companies will provide normal retirement benefits at an age that is 5-7 years below the usual early retirement age.

Outplacement services. This is offered even for retirees, even though it is usually meant for people who leave prior to retirement age. This can be helpful for determining what direction to head in retirement, e.g. new job, new careers, or full retirement.

Although the information is not generally public knowledge, what is offered by a company can be learned from recent early retirees or managers who budget responsibility. Also, since not every company offers the same incentives, it is worthwhile to check before considering early retirement.

Of course, one of the best outcomes is retiring with incentives, and then finding equivalent or better employment at a different company. I'm aware of several people who have done that, and essentially were compensated more than double in their "retirement" year.

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This is not financial or retirement advice. Please consult a professional advisor.

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