When employers offer early retirement incentives, it is usually because they want to reduce payroll costs. They usually can’t simply ask employees to take a pay cut, though it has been more common in recent years.
What they can do is offer an incentive to their more senior employees to make it more attractive to retire early.
According to dictionary.com, incentive is “something that incites to action or greater effort.”
The more senior employees are typically also the most highly paid, so by retiring them, employers can fill those positions with lower paid, and typically, younger employees.
Some of the early retirement incentives include crediting extra years of service to accelerate eligibility for retirement benefits, offering retirement bonuses or “buy out” offers, and offering free retirement counseling services, to name a few.
Sometimes the incentives to retire come from outside the job. Family responsibilities for caregiving is one of the big ones.
Or, they may want to pursue a dream career or start their own business, or convert a part-time hobby into a full-time business. Often as people get older they may feel they are running out of time to do more fulfilling work, such as volunteering.
An example of converting a hobby into a business would be selling their handmade crafts, such as pottery on the very popular Etsy service. It has become the "eBay of crafters."
Or they may want to focus on getting healthy to counteract the effects of years on the job. High stress jobs can have a huge affect on health, causing weight gain, high blood pressure, insomnia, and even arthritis. This creates a strong incentive for wanting to retire early.
Time for family becomes more important as we get older and face the loss of our parents. We realize that time is running out and now is the time to cherish the people closest to us. Grandparents relocate to be nearer to grandchildren.
Early retirement is sometimes more of a semi-retirement, such as when there is an option to work part-time or on our own schedule. Someone who has worked 20 years as an IT professional may decide to retire early but take short term contracts during the year.
A professional person, such as an attorney or accountant may scale down their client list and work fewer than 5 days per week.
You might decide to retire from your 40+ hours per week job and start a service business, doing landscaping work, decorating, or consulting in your field of expertise.
Life After Job Home > Early Retirement Planning > Early Retirement Incentive: You are here