been-offered-early-retirement Been offered early retirement?

If you’re in your mid-50s and are suddenly offered early retirement, it may be tempting to accept – especially if there’s a chance that you won’t face the usual penalties for cashing in your retirement funds prematurely. However, you need to take care and make an informed decision; there is much to consider.

Any retirement decision needs a plan

Before you make any decisions about leaving your workplace for good, ask yourself these questions:

• Have I saved enough during my working years?
• Is my employee retirement fund the only retirement savings that I have accumulated?
• What monthly income will my retirement savings provide after I retire?
• Who depends on my income now?
• Who will depend on me financially in the future?
• Is the home I own fully paid for?
• Am I debt-free?
• I’m healthy now, but what if I become ill or disabled? What would I do then?
• At work I have purpose, focus and tasks that fill my day. Will I have a new purpose in retirement?
• It’s common knowledge that people today live longer lives than those in previous generations. This poses the question: Will my retirement savings last me my lifetime?

Here’s a to-do list to further guide your thinking

1. Scrutinise your household budget. Evaluate every expense incurred in your home – the essential costs of living and the luxury items. In every budget there are fixed costs that are unlikely to change, whether you are working or not. Examples are school or university fees for your children, or debt that needs to be serviced. Those costs may be around for many more years, so regular review of your budget is essential, as your monthly income from your retirement fund may be less than your current monthly income. As a retiree, you may be able to save on costs like fuel, but new costs could arise; for example, your private medical aid, which previously may have been an employee benefit.

2. Think about who depends on you financially and how long you will have to support them. These dependants have to be taken into account in your planning.
3. Know how much retirement savings potential you are losing out on by retiring early. You’d be surprised how much you could lose in savings, even by retiring just two or three years earlier than you had originally planned.
4. Consult a financial adviser. If you don’t already have one, appoint a qualified, appropriately authorised financial adviser to help you make some of these decisions. If you decide to opt for early retirement, there is little room for mistakes or poor decisions when it comes to investing your money. An adviser’s unbiased and objective expertise will go a long way to enable you to invest and retire with confidence.
5. Decide how you will spend your time. Many retirees complain about boredom within the first six months of their retirement. They have so much time, with few activities to fill it. Consider creating a new source of income using your skills or hobbies, or consider volunteering in your community. The point is to find a new purpose, and to fulfil it with confidence.