Retiring early is a real option for many workers, but it almost always comes with a permanent reduction in the pension amount. Understanding how that reduction works is key to deciding whether it's worth retiring early or waiting until the ordinary retirement age.
The two types of early retirement
The law distinguishes two very different situations, with different requirements and penalties:
- Involuntary (forced) early retirement: applies when leaving the job doesn't depend on the worker's will (for example, a collective or objective layoff). It requires a slightly lower minimum age than the voluntary route and a minimum contribution period, and the penalties are somewhat milder.
- Voluntary early retirement: the worker decides to retire early of their own accord. It requires a somewhat higher minimum age than the involuntary route and a longer minimum contribution period, and the penalties are more severe.
In both cases, there's also a requirement that the resulting pension, once the reducing coefficients are applied, cannot fall below a certain threshold relative to the minimum pension.
How the reducing coefficients work
The penalty is applied as a reducing coefficient for each quarter (or fraction thereof) that retirement is brought forward relative to your corresponding ordinary retirement age. The more years you've contributed, the lower the reducing coefficient applied per quarter of advance, since the law favors those with longer contribution careers.
The result is that two people retiring at the same early age can receive different penalties if one of them has many more years contributed than the other: the more years contributed, the smaller the penalty per quarter of advance.
The reduction is permanent
It's important to understand that the penalty isn't temporary and doesn't get recovered over time: the reducing coefficient is applied to the pension amount permanently, for the pensioner's entire life, not just for the years remaining until the ordinary retirement age.
Alternatives to full early retirement
Before committing to early retirement, there are intermediate options that may work out better depending on the case, such as partial retirement (combining a pension with reduced-hours work), or simply weighing whether waiting a few additional quarters significantly reduces the applicable penalty, given that the coefficients are calculated in brackets.
Run the numbers before deciding
Retiring early is a decision that affects your income for the rest of your life, so it's worth simulating different scenarios (retirement age, years contributed) before making the decision. Our retirement pension calculator lets you make an initial rough estimate to compare scenarios.