The Current Trend Toward Early Retirement


early retirement age

The four components should be carefully synchronized to ensure that projected future revenues are met by benefit claims. This leads to early retirement planning. For this purpose, you need to carefully track your portfolio investments, your pension plans, your life insurance policies and so on. You also need to pay close attention to your current investments, to look at your portfolio as a whole and to evaluate your risk tolerance.

Your life expectancy should be considered along with the pension plan’s life expectancy. Most experts recommend the retirement age at the time of retirement being about sixty-five years. On the other hand, most insurance companies prefer life expectancy as the basis of their investment analysis. Therefore, if your life expectancy is too low, the pension plan might not be an appropriate choice for you. To avoid such problems, it is advisable to analyze both the rates of return on the investment in addition to the level of risk involved in each investment.

Health Status

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Health status is important in determining eligibility age for retirement benefits. Health status should be assessed at the time of entering the labor force. If you are in poor health or if your health status has declined significantly since leaving school, you might not qualify for the life expectancy benefits, even under the best terms. Therefore, early assessment is essential.

Two other factors that should be included in evaluating life expectancy are average monthly wage attained during working and potential years per decade of earnings. Average monthly wage attained during working years should be equal to the level of income anticipated at retirement. Potential years per decade of earnings should be approximately equal to the expected life expectancy at retirement. In general, the longer you work and earn, the more potential there is to accumulate retirement benefits. Thus, workers with long work experience should have enough years per decade of earnings to get maximum benefits from the plan.

Looking At The Level Of Dependence On Social Security

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One way to evaluate early retirement age is by looking at the level of dependence on social security. According to statistical data, social security disability insurance usually doesn’t start until about five years past your retirement age. If you depend on your spouse or children to survive until your retirement age, you will not reach full pensions until much older, often in your sixties or seventies.

Full pensions are typically very substantial and may supplement your basic monthly pension. As you approach the normal retirement age, however, your pension will usually stop providing full benefits. Instead, you will start receiving payments based on a percentage of your income. In general younger employees will receive larger monthly pensions than older workers, but this is not always the case.

Offer Flexible Spending Accounts (FISA)

Another trend toward early retirement age has been seen among working-age people who are starting to work for companies that offer flexible spending accounts (FISA). Among people starting out at age twenty-five, half are on FSA plans. Among people starting at age fifty-five, this proportion rises to eighty-five percent. This means that even though employers may advertise the benefits of a retirement program where workers can choose as they see fit, many workers simply don’t bother because their interest in such programs is low.

In recent years, however, the trend toward early retirement has been changing due to changes in the retirement age, resulting in less reliance on social security disability insurance and more on private versus employer-provided insurance plans. According to the trustees of the six largest U.S. fund associations, “the number of workers who are early retirees is expected to rise gradually over the next few years, reaching a level that is significantly higher than the rates recorded over the last several decades.”

Final Words

Currently, there are still about four million workers under the age of forty-five who are not covered by any type of Social Security retirement program, according to the trustees. There is a long way to go for these numbers to reach a significant portion of workers, especially as Social Security benefits become more scarce. But as baby boomers get older and the outlook for increased inflation becomes more severe, it is safe to predict that the days when Social Security was relied upon as the primary source of income for older American retirees will be gone for good.

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