Planning Retirement Early or Late Retirement

Early or Late Retirement

Making a decision upon what age to retire can often be a tough decision to make often a job can be seen as a part of your identity. Continuing to work can provide that much needed extra cash that you may not otherwise have if you were to retire a few years earlier than anticipated.  If you are planning for retirement it is important to be aware that the benefits you are entitled to are directly related to the age you are at the time of retirement.

There are three time frames of retirement which you could consider; early retirement, retiring on time and late retirement. It is important to weigh the advantages and disadvantages of these before making a decision on which one is best for you.

Early Retirement

The most obvious and main advantage of early retirement is that you can enjoy more time to yourself and pursue the things that you have always wanted to do in life without the constraints of the workplace.

Although this allows for extra freedom it does have various financial downfalls. By taking an early retirement you may receive reduced benefits, if you begin to receive benefits before the full retirement age this can result in a reduction of as much as 30%.

Therefore, if you are planning for retirement you should be aware that retirement benefits depend on age at retirement. You will also have less time to build up the benefits meaning your earned income will have to last longer as you will no longer have the extra money gained if you were to continue working.

By taking the option to retire early over normal retirement, the amount of benefit you receive can be reduced by up to 5/9 of 1% for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, the benefit is further reduced by 5/12 of 1% per month.

Furthermore, you will be required to pay for health insurance until you qualify for Medicare while health insurance and social security may not be available immediately.

It is common that you may even find yourself regretting early retirement after a certain time due to boredom or feeling a lack of purpose. You also run the risk of experiencing extra strains on home life which may have otherwise been avoided by remaining in work.

Early retirement can be highly frowned upon by companies offering pension plans. In reality, you simply may not be able to afford early retirement and can often end up with considerably less income than if you were to remain in employment until the normal retirement age.

However, some companies may offer incentive plans encouraging early retirement, sometimes referred to as ‘window incentives’. These can be particularly beneficial if you are worried about future job prospects within your company but it is important to be aware that some companies may use this as a form of downsizing when not performing as well as expected, whereby such incentives are purposely made to look attractive.

Remember retirement is a time for less work and more rest and enjoy more hobbies so always try and lead a healthy lifestyle particularly during this time to increase your lifespan and make for a more enjoyable retirement.

Retiring on time

The main advantage of retiring on time is that you have more time to set up a substantial retirement fund and allow interest to increase your funds. You are also more likely to receive an un-reduced pension benefit and social security.

You are able to draw retirement benefits from your plan at any time between the age of 55 and 75 and you can take retirement benefits from your plan if you continue to work. If you suffer from poor health and feel you are no longer able to work there are state benefits available and are eligible to draw retirement benefits before the age of 50. Previously, the earliest age that members of the pension scheme could withdraw their retirement benefits was age 50 but this has since increased to age 55 as of 6 April 2010.

Late Retirement

By choosing a late or delayed retirement you may be entitled to claim a larger basic pension or even a one off lump sum as you have more time to increase your benefits and build up your funds. Delayed retirement credit is usually given for retirement after the normal retirement age but to receive full credit you must be insured at your normal retirement age as no credit will be available after the age of 69.

Although a late retirement means you have less time to enjoy your retirement years you may actually enjoy working life and feel it provides you with a sense of identity and belonging. By deferring your pension withdrawal you have longer to save for retirement, for example if you were to retire at 60 rather than 55 you would have five extra years to save up for when you do finally decide to retire.

Delayed retirement also overcomes the issue of health insurance where you can immediately qualify for Medicare and higher social security benefits. Therefore, late retirement can result in larger, increased benefits for you to enjoy and may see it as a good way to fill a pension gap.

If you work on a part time basis after retirement this can provide a supplementary small income but in doing so it is important to take additional costs into account such as a reduction in social security and a rise in income taxes.


It is important to take careful consideration and exercise thorough planning prior to retirement. The worst thing that can happen is to reach an age where you no longer want to work but are not able to retire because you don’t have the money saved to afford to do so.

So financial planning is the best tip to plan and manage your finances to ensure you never fall short of money and get the most out of your retirement. To help you in your planning it may be worthwhile seeking professional advice from a financial planner to better understand and weigh up your options for retirement.


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