> Early retirement
What you need to know if you retire early
Are you planning to retire before your reach state pension age? If so, no problem! But there are a few things you need to bear in mind.
Retiring early = a lower pension
As long as you are working, you build up pension, but as soon as you retire, that will stop. If you retire before reaching state pension age, your pension pot will therefore be smaller than if you were to continue building up pension until state pension age. You will receive your occupational retirement pension for the rest of your life. If you retire earlier, you will receive your pension for a longer period. So that’s why your pension benefit will be lower.
Higher tax rate
As soon as you reach state pension age, a different tax rate will apply and will be lower than before you reach state pension age. If you retire before reaching state pension age, you will therefore still be subject to the higher tax rate. As a result, you’ll have less money left over after tax.
First a higher pension, then a lower one
If you retire early, your pension benefit will be your only source of income until you reach state pension age. What if that isn’t enough to cover what you want to do? In that case, you can temporarily increase your pension benefit until you reach state pension age. After you reach state pension age, you will then receive a lower pension, but you will also be receiving your state pension. This will enable you to keep your income more or less the same before and after reaching state pension age.
Do the maths
Early retirement has financial consequences, so you need to work out the maths carefully: what is your fixed expenditure? If you own a home that’s fully paid off, you’ll no longer need to pay a mortgage. What if you’re renting? In that case, those costs will still need to be paid. You should also remember that energy costs and taxes may rise, so it’s a good idea to allow a bit of leeway in your calculations. The pension planner in My Koopvaardij shows you the consequences of taking early retirement. You can also see the options available to you regarding your pension and your partner’s pension should you pass away. Calculate it at deelnemer.koopvaardij.nl.