Your retirement years should be a time when the complications of life melt away into the bliss and freedom of stress-free days. Increasingly, however, retirement is more complicated. Questions about investment funds and retirement accounts are pervasive. As you consider your options, one piece of the retirement pie that you may be able to take advantage of are deferred retirement benefits.
Deferred retirement benefits are common in most defined benefit retirement plans. They come into play when you have earned retirement benefits by achieving proper age and years of credited service requirements but you have not yet reached minimum retirement age. In essence, you are just not old enough yet. These benefits are the exact same as normal retirement benefits but they are not in effect when you leave the employer; they are deferred until the minimum normal retirement age is met.
Earn Your Pension Benefits
Most pensions are structured to combine a minimum number of years of service at your employer and a minimum age. Some only require a number of years of credited service while others may only require you reach a specific age. If you have a pension that has a “Rule of …” requirement, this is the number of years of service and age added together. Normal retirement benefits are usually the highest benefit level for a plan, so most retirement plans have a specific age when you become eligible to receive normal benefits.
Leave Employer Early
The choice to leave early is good to have. Retirement benefits are a steady stream of income in your retirement years. However, leaving an employer early can give you the opportunity to work for another company and earn more money or even another retirement benefit. Other options like self-employment also become choices. What you do between the time you leave your employer and reach your retirement age can add additional income to put into other investment vehicles or just give you options to work the way you want to work.
Deferred Benefits vs. Early Benefits
Another option with most retirement plans is early retirement. You earn these benefits in the same way as normal benefits. However, choosing to take an early benefit means that the amount you receive per month will be reduced. Similar to deferred benefits, because you are not old enough for normal retirement, early retirement benefits can also be a good option if your plan allows them. In a case such as this, you should make a careful review of the deferred benefit compared to the early retirement benefit to see if it is compatible with your retirement aspirations.
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