When can I retire?

We'll explain to you all the suppositions and alternatives for retirement

Following the pension reform that entered into force in Spain in 2013, the normal retirement age is in the process of increasing, from 65 to 67, where it will remain in 2027 and in subsequent years. At that point it will be possible to retire at the age of 65 without penalty provided that the retiree can prove at least 38 years and 6 months of contributions. In 2018, the normal age of retirement is 65 years and 6 months for people who have paid social security contributions for 36 years and 65 years for people whose contributions total less than 36 years.

There are, however, alternatives available to normal retirement that can make you eligible for early retirement: voluntary retirement and early retirement, which are two ways of giving up work, but which involve different procedures.

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Early retirement

The Social Security Institute provides the option for an employee to retire before the aforementioned normal retirement age. This retirement may be voluntary or forced by external causes. Let's look at both cases.

If an employee wants to voluntarily retire before the normal retirement age, there is a series of requirements that must be met according to the employee's age and years of making contributions. Specifically, in order to access this type of voluntary retirement you must be no less than two years younger than the normal retirement age to which you are subject. For example, if an employee wants to retire early in 2020, they can only do so if they are 63 years and 10 months or older, since for that year the normal retirement age will have increased to 65 years and 10 months. If, according to your contribution plan, your normal retirement age is 65, you will be able to bring it forward it to 63. Keep in mind that, where applicable, the age at which the employee would be able to retire had s/he continued making contributions (during the period between a triggering event and retirement age) will be taken into account for the sole purpose of determining said legal retirement age.

Furthermore, in order to take advantage of this voluntary early retirement option, a person must have made at least 35 years of contributions and be registered, or in an equivalent situation, with the Social Security Institute. Lastly, you may only be able to access this type of retirement if the resulting value of the pension is not less than the minimum pension to which you would be legally entitled upon turning 65.

However, the law also allows for forced early retirement, which may result from layoff and must be the result of objective corporate restructuring. With this type, the requirement for qualifying for early retirement is to be no less than 4 years younger than the normal retirement age and to have contributed for a minimum of 33 years. As a final requirement, the employee must register with a BBVA branch a minimum of 6 months prior to the retirement request date. 
It is important to remember that for each year you take benefits before full retirement age, the public pension to which you are entitled will be reduced.

Early retirement

Early retirement usually occurs in cases of dismissal in which the employee is very close to retirement age and the minimum number of years of contributions to qualify for a public pension, but has not yet reached either. As such, with early retirement the employee and employer reach an agreement to terminate the employment contract. In these cases what most commonly occurs is that, until the employee can receive their retirement pension, the employer pays the employee an agreed sum of money in addition to the customary compensation for dismissal.

In many cases of early retirement, the employer pays the employee's social security contributions, by means of a special agreement. This way, there is no penalty on the retirement pension during periods in which there was no obligation to contribute. In some cases, the employee may choose to meet this requirement.

Employees may simultaneously collect the amount agreed upon with their former employer as well as the unemployment benefit to which they are entitled.

It should be clarified that the Social Security Administration does not consider this type of early retirement as a legitimate type of retirement. For legal purposes, the employee remains in the social security system as unemployed, and as a result can receive the corresponding benefits for a maximum of two years, as stipulated by law.

Once the employee exhausts his/her unemployment benefits, s/he can access the so-called unemployment subsidy, whose duration starts at six months and can be extended to a maximum of 18. However, if the employee is over 55, the unemployment subsidy will be extended until s/he reaches early or normal retirement age. With this support, the employee will make the minimum contribution to Social Security. It is the only non-contributory benefit in which the employee makes contributions for his/her retirement.

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Partial retirement

A third way of starting retirement is phased retirement. With this type, the employer allows an employee to continue working with a reduced workload. This way, the employee can continue to earn a proportional sum from the number of hours they work while beginning to draw retirement benefits.

In order to qualify for partial retirement, the employee must have made contributions for at least 33 years and be no less than two years younger than the legal retirement age.

The employee's work schedule will depend on whether their early retirement includes the hiring of a replacement employee (hand-over contract) or without the hiring of a replacement. In the first case, there could be up to a 75% reduction in the workload (when the replacement is hired indefinitely and full time), while in the second case, the reduction may range between 25 and 50%.

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