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Advice on Early Retirement - The Bills.com Blog
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Advice on Early Retirement
Monday, Jul 28, 2008
Question: This is a little long! At my government job I can retire without a penalty at 55 years of age. For each year I retire before my 55th birthday I will have a 6% penalty or reduction in my pension. If I have 26.667 years of service I will receive 80% of my salary in retirement. I have a year of sick leave that will assist me in getting to the 26.667 years, but it won't help with the penalty. If I don't use my sick leave, I will lose it. I am 54 this year. In December I will have 25.75 years of service. I want to retire this year and use my sick leave to get me to 26.667 years of service. However, if I do I will be subject to the 6% penalty. If I wait until next year to retire I will loose my 2000 plus hours of sick leave. What should I do?
Answer: I cannot tell you exactly what you should do, as I do not know enough about your financial or personal circumstances to provide you with informed advice. I strongly encourage you to consult with a professional financial or retirement planner in your area who can carefully review your finances and tell you whether or not early retirement is a good option for you. Besides your finances, you must consider other important factors which often lead workers
to early retirement, such as your health, your family needs, and your overall retirement plans. For example, if you have a family member who is experiencing health problems, retiring a year early may give you needed time to help focus on your family member’s care and treatment.
From the information you provide in your question, the only benefit I see to working for another year would be the 6% increase in your pension payments. While the large amount of sick time you have accrued will count toward your years of service if you choose to retire early, I understand from your question that you will not receive a cash payment for your accrued time if you do decide to work until 55 years of age. So it looks like the only difference between retiring now or retiring next year is the 6% penalty you will incur if you decide to retire early. Either way, you will not be “giving up” your sick time, as
From the information you provide in your question, the only benefit I see to working for another year would be the 6% increase in your pension payments. While the large amount of sick time you have accrued will count toward your years of service if you choose to retire early, I understand from your question that you will not receive a cash payment for your accrued time if you do decide to work until 55 years of age. So it looks like the only difference between retiring now or retiring next year is the 6% penalty you will incur if you decide to retire early. Either way, you will not be “giving up” your sick time, as
you are not really being compensated for the sick pay. If you were able to cash out your sick time, working the additional year would likely be the best choice, as you would receive the additional 6% income plus a cash payment for your 2000 hours of sick time. However, since you will not receive a cash payment, you probably only need to consider if the additional 6% in pension payments is worth working for another full year. You will need to work with a retirement planner to set out your goals, such as travel plans, to plan a budget, and to determine if an early retirement will allow you to meet your goals. For more information about planning for retirement, you can visit http://retireplan.about.com/.
I wish you the best of luck in planning a happy and healthy retirement. I hope that the information I have provided helps you reach your retirement goals and helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
I wish you the best of luck in planning a happy and healthy retirement. I hope that the information I have provided helps you reach your retirement goals and helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
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