Companies are downsizing. If you are five years from normal retirement age you might be offered an early retirement package - i.e. an offer of money in return for retiring at an earlier time than you had planned. What should you think about before selecting to accept it? Utilizing an early retirement calculator can provide some preliminary insight.
You need to examine your financial scenario, your household's requirements, and whether or not you've enough money to fund your lifestyle for the following several years.
The issues of concern are:
- Evaluating your retirement strategy and stock option issues.
- Preserving insurance coverage for health and life insurance.
- Whether the early retirement will mean a haircut in retirement benefits or pension
- Generating earned income for the period of retirement
Health Insurance
Find out in case your employer provides any continuing medical health insurance for the retirement years. If that's the case, just how much will it cost? Employer-provided health care might end on the day you're laid off or soon after. However, by U.S. law, the Consolidated Omnibus Budget Reconciliation Act (COBRA) permits you to continue your current insurance coverage, which includes certified physician, hospital, dental, vision along with other medical costs, at group rates plus a little administration fee. You've a limited time to elect COBRA coverage before it lapses and the group rates only last for a limited amount of time (18 months in most states).
The retirement strategy and stock option problems
Your company's plan administrator should offer a written justification of your options 30 to 90 days prior to the final date on which you need to take action. Make it clear when you may begin acquiring strategy advantages, what form they take, and what the outcomes are of beginning benefits early. As soon as you've these quantitative details, put the figures into an early retirement calculator to weigh pros and cons.
Life Insurance
Will it be in your early retirement plan? Life insurance coverage is not supplied under COBRA. But your ex-employer might pay it for a month or more as part of your severance pay and benefits, after which offer a continuance option. It usually isn't cheap either; and you might be able to find a better package. But as with medical health insurance, brand-new private plans may not cover you for previous or existing conditions. Investigate them completely, prior to declining or accepting your ex-employer's plan. It is probable you don't need life insurance coverage. Often, an early retirement calculator will provide a functionality that can determine life insurance coverage requirements based on your family circumstances. Almost always, these requirements are a function of having minor children to support.
Revenue
How would you make income and how much do you'll need? Will you qualify for unemployment benefits - and if so, how long will you need wait before qualifying? Figure out other options for retirement work for the duration. Use an early retirement calculator to enter your projected expenses. The calculator will then factor in your tax rate to calculate needed revenue. As an instance, if your expenses are $5,000 monthly, you'll require approximately $6200 of revenue to cover expenses and taxes (consider your move now to a state with no income tax).
Using an early retirement calculator is a great first step in deciding if an early retirement is possible. In fact, do not be alarmed if it raises additional questions as the subsequent step may be to seek advice from a retirement consultant for some expert help.
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