social security


Huge corporate entities are starting to offer hefty severance packages and an early retirement to older employees who have been with the company for a long time. Companies are doing this to avoid layoffs. If you get one of these offers, these questions can help you decide if early retirement is really in your best interest.

Will you be penalized for accessing retirement funds?

Most Americans have retirement funds saved through 401(k)s and social security. Money can be withdrawn from a 401(k) at 55 without any penalties. At 62 1/2, the social security administration will allow an individual to start drawing social security.

In both cases, there is potential for a person who starts drawing on these funds early to cut themselves out of thousands of dollars worth of retirement benefits. Carefully study the terms of your 401(k) and consult with a financial advisor before you start drawing retirement funds too early.

Can you afford health insurance?

Call your insurance provider and find out what your monthly premium would be if you retired. Your severance package could make you ineligible for subsidized insurance programs.

Medicare is only for individuals over 65. Does paying for health insurance in the meantime make retirement infeasible?

What will replace your income?

A severance package is great, but it will only sustain you temporarily. Where will your income come from in retirement? Will you need to find another job? Try to get an accurate figure of how much you will receive per month from all retirement funds and determine if that is enough to cover your bills.

If you find that early retirement is not a viable option, don’t get discouraged. Use this as a reality check and start planning to make your actual retirement as comfortable as possible.