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By retiring early, you will end up accumulating fewer years of contributions to your retirement plans. Most people earn their highest salaries towards the end of their career, by retiring and taking your pension early, you will be losing substantial amount of contributions based on your end-of-career salary. This in return means smaller pension check compared to what you would have received if you had stayed longer at work.
However, this does not mean that taking your pension early is a bad thing. But only certain people should consider doing this. Basically vested workers who feel that their pension plan is underfunded and will not cover should take this step. However, this is not easy to predict. The only way to find out the pension plan’s funding is to formally request for the information from your employer.
The Pension Benefit Guaranty Corporation (PBGC) reduces the monthly payout drastically if you take your pension before you reach the age of 65. However, if your employer has an early-retirement subsidy and is willing to pass it on to those who take lump sums, it definitely makes sense to take your pension early.
The PBGC regularly publishes a lifespan estimates as pension payments are calculated on a person’s expected lifespan. However, if you feel that you not last the average lifespan stipulated by the PBGC, it makes sense to cash out the pension early.
The answer to the question: Should I take my pension early? is up to you as the choice to take your pension early depends on what you feel is the right thing to do. You should weigh the pros and cons before taking such a drastic step.
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