Retiring early and stopping work at 50?
Since 2012, we have seen an increase in requests from employees for retirement simulations around the ages of 50/55. For any questions regarding early retirement, please contact our experts. Indeed, it is the dream or desire of many people to stop working before the retirement age, and contrary to popular belief, this goal is not so complicated to achieve for those who are determined.
Below you will find the essential points to respect when ceasing activity at 50/55 years old to limit financial risks or avoid fatal mistakes.
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When I talk about retiring, I obviously mean stopping work and waiting for an effective retirement since the legal retirement age in 2020 – pending the Macron reform – is 62 years old (unless you worked before the age of 20, in which case you can retire at 60 with full benefits or even earlier at 58/57 if you started very young in life before turning 16, for this, see our article on long careers, we even offer a long career retirement simulator for early retirementhere.) To be complete, there are other specific cases allowing for early retirement such as disabled workers, civil servants, certain categories of entrepreneurs, politicians, asbestos schemes, our colleagues from SNCF, RATP, EDF, National Education, etc. And one last point, be careful that the legal age does not mean full rate either!
Here are 5 things that must be checked to retire as early as possible calmly.
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How long to contribute?
Calculate your full-rate retirement age
To stop working earlier, it is necessary to accurately estimate the number of years to contribute to obtain a full pension.
Knowing precisely the number of years and quarters remaining to be paid allows you to decide whether or not to continue having a minimum of contributions to validate 4 quarters per year until the date of full rate. If you need quarters, you can contribute yourself (see here the salary amount to validate a quarter in 2018), or find a small job that can validate 4 quarters even without working for 12 months if the amount received is sufficient to validate the 4 quarters directly (see previous link: amount of salary required to validate 1 full year in 2 months of contributions).
If your full-rate retirement age is 67 years and even at 67 years, you do not have quite the required number of quarters, you can decide as early as 55 years to stop your contributions until you retire at 62 years (or 67 years if you want to benefit from the automatic full rate). Indeed, why continue to accumulate quarters since, in any case, you will never have your full rate, except at the age of 67? It is not useful to do much unless to improve your retirement base (but for that, again, you need to record sufficiently high salaries, otherwise you could even lower your average for calculating the basic annual average salary) — the famous 25 best years.
Another important point is that if you can benefit from a full rate at 65 years, for example, you can buy 3 years as allowed by law and thus benefit from a full rate at 62 years. For the moment, you must continue to contribute a minimum to validate the 4 quarters per year until 62 years if your buyback has not been completely useless.
If you have the maximum allowance (capped at 22% on your complementary or 22.5% for social security) having more or fewer quarters has only a reduced influence on the anticipation coefficient which penalizes those who retire before the full rate.
I agree, it’s a bit technical but very important because the average retirement period for the French is 27.2 years, so a financial mistake that drags on for 27 years is costly. We can help you make a calculation based on your statement (without intervening with the funds) to arbitrate this: 990ht or 1250ht depending on the complexity, the details of the service here.
For any questions regarding quarter validation, click here.
The specific case of end-of-career unemployment:
For employees, it is always necessary to study the possibility of a mutual termination or a dismissal in order to receive 24 or 36 months of unemployment benefits (depending on the age of dismissal), which can be recalled, allows you to continue contributing to the pension scheme and benefit from 4 quarters per year with the social security system while also benefiting from free housing beyond unemployment compensation. until the full rate is obtained. Magical, right? Requirements: If you have at least 20 years of contributions, you can, beyond your unemployment benefit period, validate 5 years of quarters (i.e., 20 quarters). However, be careful, capped at 20 quarters if you are dismissed at 55 years, so you will only have quarters until 60 years, assuming you have a full career, you will still miss two years or 8 quarters to benefit from your full rate at 62 years (in this case study how to validate these quarters – registering as a self-employed person could be a lead -). For registration, previously we validated quarters until the full rate, but that was before…! Another generosity of the unemployment benefits system, if at the time of the legal age you do not have your full rate, your remuneration continues with all its benefits in periods of 1 year tacitly renewable until the full rate. If you entered this phrase correctly and calculate quickly, it means that you can receive unemployment (and benefit from all its retirement benefits, especially regarding the points that are awarded) for much more than 3 years since you can go up to 8 years of remuneration at the employment division without degression! As I said and I repeat, the unemployment system continues to feed your accounts with additional fund points (within the limit of 4 social security ceilings), in other words, the unemployed improve your future retirement! Isn’t that a nice life? A final commission of the unemployed is a real advantage for a serene end of career.
To learn more about unemployment and retirement which can do a good job or, on the contrary, penalize your future pensions, visit the dedicated page here.
The specific case of an agent who owns their business:
For a business owner who wants to sell their business, never lose sight of the fact that the reduced tax on capital gains from the transfer of shares, in other words, the sale of your business, is valid 2 years before the sale of the business and 2 years after the sale of your business. So be careful if you sell and continue a minimal activity within the company, the delay continues to run and this reduced taxation disappears, even if you leave too early and sell your business and choose, for example, to only receive dividends until retirement, you will lose the benefit of this tax reduction.
To see articles on the retirement of business leaders => click here.
Exploring options to bring the full rate closer to the age of 62:
Yes, if your full rate is around 65 years, buying back years of studies or incomplete years through the barbaric-named device of VPLR (pension payment) makes sense here if you lack a few pensions to benefit from the full rate before your 67 years. Cost, conditions, tax exemptions, calculating profitability, see our page on the buyback of the so-called VPLR quarter here.
Be careful, if you exchange quarters to improve the date of your full rate, you should not stop contributing sufficiently to continue validating and obtaining 4 quarters per year until the departure date, otherwise the buyback could ultimately prove useless.
Calculate your retirement pension
Retiring as soon as possible means accurately estimating what resources will be available per month from the chosen age. This is essential, and for a precise retirement calculation, it is better to go through a good retirement advisor (even if your file is simple because the error is never where you expect it) and also include all the resources you will have: retirement from the CNAV ARRCO AGIRC for an executive employee, for example, the capitalization of pensions, life insurance, rental income, income from financial assets or dividends, etc.
To calculate your pension from the distribution schemes, see our advice here.
This pension calculation is also essential because stopping contributions earlier will penalize the calculation base of the future pension. Remember that fewer contributions mean fewer points in the complementary (ARRCO, AGIRC, IRCANTEC) and fewer “best” salaries for calculating the social security pension (CNAV) even if you already have your 25 best years. Indeed, a better recent year in the 25-year account removes from the calculation a better year from 25 years ago, which, even improved, will always be worse for the calculation.
Estimate your expenses:
The previous points focused on resources, which is good, but it is very important not to neglect, it is to accurately estimate your financial needs and plan them. Indeed, you need to determine precisely the amount of net monthly income and net tax you need to meet all your financial obligations and anticipate the necessary adjustments on the sources of expenses to examine (second homes and other money-consuming activities, etc.).
Expand your future resources as soon as possible through retirement savings, but not just that.
Automatically contribute to your company savings plan such as PERP and PERCO, article 83 and other supplementary pensions called “chapel retirement”. Indeed, depending on the terms, the tax reduction on contributions, but also the absence of taxation on the capital you receive or on the pensions you receive is not negligible. Remember that paying little but regularly always ends up being rewarding: “small streams make big rivers,” this saying is really logical when it comes to preparing for retirement. To see the retirement savings schemes and other retirement plans available in France, it is here.
Diversify your non-paper investments and other securities held by banks and financial institutions that are not so sheltered from a fatal crisis as we want to believe (do you believe in the state financial guarantee of up to 100,000 euros in case your bank defaults? I don’t… Anyone who prepares their retirement properly always has a real estate component that will allow them to earn rent. Be careful, however, with real estate, it’s a professional matter. Don’t forget that it requires maintenance costs (so an expense to budget for) and there can be a tenant who is indelibly protected by law (especially in France) and who may not pay their rent for years before you can evict them. Finally, real estate is increasingly taxed in France and, moreover, rents are indirectly regulated (even if the rent is initially free, the increase is then framed and indexed). The more enterprising can turn to real estate abroad as well, sometimes extremely lucrative, such as real estate in the United States for those who invested before 2012 (10% return/year), in Thailand where real estate growth is fantastic (but where you do not own the land), in Germany with a real estate stock still very undervalued in 2018 and prices that are skyrocketing (12% in Berlin in 2017!), in Canada, particularly Quebec.
A final trend comes from Anglo-Saxon countries: investing in income-sharing companies: here, investing in a company is not done with the aim of future resale at added value, but rather with the perspective of a regular income. Some professionals structure investment vehicles in this direction and this can work very well with quarterly gains that will be a full additional retirement income. However, be careful, we are touching on a more entrepreneurial aspect of investment (investment security, distribution, exit conditions -capital recovery – etc.), but these companies exist and allow for very good profitability that constitutes a real supplementary income sometimes higher than retirement for those who have enough capital to invest (for example, 250,000 euros generating 12% per year yields an additional gross annual income of 30,000 euros, more than retirement itself in many cases!).
Do you want to increase your income by 1,500 €/month and you have not accumulated reserves in a supplementary retirement plan during your career? It is possible if you have significant capital with the latest structured investment vehicles from Anglo-Saxon countries: no stock market or real estate, only companies that depend on conventional activity but whose portion of capital invested by individuals is compensated by a monthly distribution.
And the children in all this? Be careful!
Finally, one last point that is often forgotten and is of paramount importance: guiding your children towards financial independence as soon as possible, because it is when parents consider slowing down that children start their higher education and it is often at this time that the budget for older children explodes: housing, transportation, school fees, clothing, outings, etc… So the sooner your children are able to take care of themselves, the better your finances as inactive or retired individuals will be!
But specifically regarding children, have you read the article so far? Thank you, and for that, I will give you another tip and especially for your two children by allowing them to validate 4 terms as long as they are students while saving you taxes (well, all this depends on your marginal tax rate, of course). Quarters are just part of all the benefits that I reveal here.
For 20 years, I have been helping employees calculate their pensions and assisting them in optimizing their retirement conditions to retire as soon as possible, do not hesitate to contact us. Our firm has handled thousands of cases, from simple hourly or phone consultations to complete management of your files and interventions by mandate to the funds. A true profession of expertise and support and assistance for retirement.
Do you also want to stop as soon as possible?
► Do you not know at what age to leave or what amount?
► Do you need advice to plan your departure?
► Do you need a technical arbitration (unemployment, cumulative retirement, gradual dismissal)?
► Do you not want to take care of the administrative part?