Compensation Glossary

Early Retirement Agreements

There are two ways in which early retirement agreements can occur. In some retirement plans early retirement is built in. This is especially true of defined benefit plans. Many such plans define an early age when the employee may retire at a reduced monthly payment, based upon age, tenure, and salary. In a defined contribution plan, the employee would be able to draw out his/her account at an early age. Organizations may choose to initiate an early retirement program in lieu of lay offs. These must be voluntary early retirement agreements. This is done by adding years to workers' ages and lengths of service. Some firms make the offer more attractive by offering outplacement assistance. Employees may be more likely to elect early retirement if the employer makes it easier to find new jobs through outplacement counseling.