What if I told you that you could retire early to increase wealth? Maybe you would think that I am crazy. But I have done exactly that by taking advantage of my pension benefit and living the Retire Early and Often lifestyle. This page could have easily been called “Use your pension to increase wealth”. But you still need to retire to do that.
If you have reached at least the minimum requirements to receive your full pension and retirement benefits (age + years of service) and you are asking yourself all of those questions. You know, those questions about retiring early and wanting a change of scenery. Wanting to do something that you are interested in or passionate about. If you have these thoughts then you just might want to continue reading.
First off if you are someone who has basically landed in a cushy space at your job. Someone who has been able to rest on seniority and one of those identified by co-workers as “retired in place”. Then Warning. This isn’t for you. If you can’t retire early on your pension and savings. Then you might want to reconsider and just stick it out until you are ready to totally retire. It is a very competitive work environment out there. There is age discrimination and your skills may not be up to snuff or in high demand.
This plan is for all the pension eligible go-getters out there who have been the motivated go-to folks. Those who are looking for a change and the opportunity. The opportunity to finally follow their passions. To be able to shed the legacy, expectations, and heavy burdens of their long career at the same company or public position. This is for those who have earned the freedom to retire early. Earned by living below their means, saving, and having the drive to seek fresh opportunities. Those who want to learn and do new things and increasing their wealth while doing it.
You Can Retire Early to Increase Wealth
Research your pension benefit:
You must research and find out everything you can about your pension benefit. Make sure you are considered pension eligible for your plan. Find out what the differences are between leaving at the minimal combined years of service plus age and where you are at in that scale. Then compare that to what it would be for staying longer.
For instance. Your plan may say you are fully eligible at age 50 with 25 plus years of service. Age 55 with 20 years of service. Or any age with 30 years of service.
There may be a penalty for leaving with 30 years of service but being under age 55. If so what is that penalty? Is it worth hanging in there for? If it is a 3% penalty per year until age 55 then that may not be enough to stay working there. If its 8% then you might reconsider. It will be up to you. Many people are working for a company that has frozen their pension plan. If that is your case then you won’t have to worry too much about the above. It is frozen and most likely not increasing. No matter how long you stick it out there.
The other thing that must be considered is whether you have a retirement health insurance benefit and whether you will qualify for it. Health insurance on your own can be expensive. If you don’t have a retirement health insurance benefit then run the numbers of what that will cost. You can also concentrate on new opportunities that offer health insurance as part of the employee benefits. Also look at ACA (Obamacare) and any applicable subsidy thresholds to understand your options.
You are in the same job but working for less than you were before
Your paycheck may be the same as it has always been. Perhaps you even picked up a big 3% raise over last year. However, you are leaving your pension money on the table. Your pension may grow 3% per year until you hit an older age threshold like 55. But what if you took your skills and experience somewhere else and released that pension payment to work for you now?
Say you are a technician pulling down $60K a year. You are 52 with 30 years of service and qualify for a $24K a year pension. Therefore you are working for $60K – $24K = $36K a year. So even if you still love what you do, do you think you would maybe love doing it a bit more somewhere else? Especially when releasing your pension benefit to work for you? Even if you start somewhere else for less salary, adding in your pension should still surpass what you are gaining by staying put. This is how you can retire early to increase wealth.
Retiring Early and Often
Before you decide that the retiring early and often lifestyle is for you, be aware that it is still best to follow the number one Leisure Freak rule of retiring early and often: Do not voluntarily retire from your current position if you have to find another job. Not unless you have already found and secured your dream position before you retire and are able to financially retire early. Or you are at least close financially to being able to retire early without having to continue working.
I have a whole page on this Retire early and Often subject which you should also look at. I also may add that it is always easier to find that perfect next adventure while you are still employed. That would take some of the fear out of making your early retirement move. However if you are like me, I wanted to enjoy some retirement time before hitting my bucket list and trying for a new opportunity. It was easy for me to decide to retire early because I didn’t need to find another job.
My Retire Early to Increase Wealth Experience
I retired at age 51 with 31 years of service. I did all the analysis about my frozen and diminished pension of which I took a lump sum buy-out. Then I combined my pension buyout with my 401K and IRA holdings. I have a whole page on this subject so please check it out. Having my retirement funded means I don’t have to find a job. I had a short list on my Bucket List. A list of positions I would be very interested in doing and learning new things that I was passionate about.
My First Opportunity
The first bucket list opportunity I took was a lower technical position than I had been. It paid less than I had previously made. But I was still able to save and invest 100% of my take-home pay every month. My salary plus my retirement check (SEPP-IRA 72t monthly distribution) was 21% more than the top union scale pay for top technicians at the company I had retired from. I had far less stress and it was awesome.
My Second Opportunity
The second bucket list opportunity paid more than I made as an Engineer I had retired from. Even after serving that company for 31 years. Let me just say in the most wonderful terms that my savings and investment rate was far higher in my encore career.
My personal “retire early to increase wealth” results:
In less than 2 years since my first retirement I was able to pay off my remaining $95K mortgage balance. I also doubled what I had in non-retirement savings and investment accounts from when I first retired.
Even though I had within my retirement budget to make payments on my low-interest, low balance mortgage, it was very nice to have the ability to pay that off and cut my monthly expenditures. That of which also then increases my savings rate.
That is the power of the Leisure Freak Retire Early and Often lifestyle. Under the right conditions, you can retire early to increase wealth.