Should I retire early?

Unfortunately, there is not a one-size-fits-all answer to this question.  According to Michelle Slawny, Sr. Financial Planner, CFP® for WEA Trust Member Benefits, “Every situation is different. There is much to consider, including the district contract, the member’s life situation, how much the member has saved on their own, years of service, etc.” Additionally, there are non-monetary considerations that each member will need to weigh into their decision.

Michelle provides financial planning services for members. She has completed more than 400 retirement income analyses over the last three years. “Emotions are running high right now. Members are very concerned about their future, but it’s never a good idea to make important decisions based on emotions.” She advises members to take a deep breath and slow down.

“Make sure you are getting accurate information and make sure you understand what retiring even a year early will mean to your finances for the rest of your life.”

Here are six ways an early retirement may affect your financial future.

Retiring early can mean:

  • A decrease in your Wisconsin Retirement System pension benefit each year, every year for the rest of your life.
    Result: Reduces retirement income
  • A decrease in your social security payment for your lifetime
    Result: Reduces retirement income
  • You won’t be able to contribute to your 403(b) account
    Result: Reduces retirement income
  • You won’t be able to contribute to an IRA unless you have earned income from a job. Result: Reduces retirement income
  • An increase in the number of years you need to cover regular expenses with your retirement savings.
    Result: Increases the cost of your retirement
  • An increase in the number of years you may need to pay for health insurance premiums before reaching Medicare age.
    Result: Increases the cost of your retirement

Of course there are other considerations. Many members close to retirement are tempted by a health insurance benefits or a cash incentive. In general, Michelle has found that these incentives being offered to members can be of significantly less value than the additional year(s) of service that would increase your WRS pension benefit over your lifetime.

This is not to say you should not retire. For some members, retiring now may be a fine choice.

The important thing is to make sure you get accurate information and look at the whole picture. You may want to consider getting professional, unbiased guidance as you decide what is best for you.

WEA Trust Member Benefits offers two fee-based services to help retirement planning for Wisconsin public school employees—the retirement income projection and the retirement income analysis. For descriptions of each go to weabenefits.com/fps or call 1-800-279-4030, press 1 then 4 at the prompt and extension 6730 or 2753.

All investment advisory services are offered through WEA Financial Advisors, Inc.

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