Does early retirement exist for self-employed workers?

If you meet certain requirements, you can enjoy your well-deserved pension before the ordinary retirement age

We want to tell you about the possibilities available to self-employed workers for taking early retirement. When it comes to early retirement, the scheme that includes self-employed workers is more restrictive than the General Scheme that is used for employees. Specifically, self-employed workers don't have the option to retire early if their employment is involuntarily terminated. If they can prove they meet certain requirements that also apply to employees, they can voluntarily retire before the usual age.

As you shall see, the possible hardships that early retirement can cause if you are self-employed are worth taking into account, not only when taking a decision if you are about to retire, but also as far in advance as possible in order to plan from a financial point of view.

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The legal framework of early retirement for self-employed workers

Although this may seem obvious, it's important to remember that if a retiree wants to join the flexible retirement scheme, it is mandatory that they notify the Social Security. Firstly, you must arrange it so the bank lowers your pension by the right amount, and secondly, so that no inconsistencies arise that

A freelance or self-employed worker is entitled to retirement, even an early retirement, just like employees, provided they satisfy the vesting periods that are required in terms of social security contributions. The retirement benefit is calculated based on the number of years they have made social security contributions for, as well as based on the contribution base on which they chose to make their social security contributions.

As for when they can access retirement, this depends on certain factors that we will analyze later.

As stipulated in the Social Security's Special Scheme for Self-employed Workers (RETA in Spanish), a self-employed worker is required to contribute from day one of the month in which he/she starts working. The amounts they have to pay for these contributions is calculated by applying the applicable rate to the contribution base. In this case, the contribution base currently in force since 07/01/2017 is between a minimum of €919.80 and a maximum of €3,751.20 per month. There are, naturally, certain discounts available based on age, field of work, sex, and so on. In short, the amount of the pension that a person is entitled to when they retire depends on how much they have paid in social security contributions. As a worker, whether self-employed or an employee, it is essential to know what your contribution base is, since this is the only way to determine the pension you will receive.

Once the legal retirement age is reached, the pension is received in its entirety, though to be eligible for the full amount, a minimum pay-in period is required (at least 37 years starting in 2027). In Spain, the last pension reform decided to delay – until 2027 – the ordinary retirement age to 67 (people will still be able to retire at 65 without penalties if they have a minimum pay-in period, which starting in 2027 will be 38 and a half years). This raises the question: how long in advance can I retire if I am self-employed and I want to receive my pension in full? In 2018, only after 35 and a half years of making contributions, and retiring at the ordinary retirement age, will you be able to receive 100% of your regulatory base amount. Retiring before the ordinary retirement age will result in your pension being adversely affected.

Voluntary early retirement for self-employed workers

Self-employed workers can take voluntary early retirement up to two years before the ordinary retirement age that corresponds to them, provided they can prove that the following requirements are met:

  • 1. Be registered with Social Security or in an equivalent situation.
  • 2. Have paid effective contributions for at least 35 years. Exclusively for this purpose, you can count up to 1 year of military service.
  • 3. The resulting pension is not lower than the minimum pension that the self-employed worker would be entitled to by law upon reaching the normal age.

How much would the pension be reduced by? It depends on the total number of years of social security contributions that are proven, as well as on how long in advance the person retires compared to the ordinary retirement age (counted in quarters or fractions of a quarter):

  • Coefficient of 2% per quarter when the pay-in period is less than 38 years 6 months.
  • Coefficient of 1.875% per quarter when the pay-in period is equal to or more than 38 years 6 months and less than 41 years 6 months.
  • Coefficient of 1.750% per quarter when the pay-in period is equal to or more than 41 years 6 months and less than 44 years 6 months.
  • Coefficient of 1.625% per quarter when the pay-in period is equal to or more than 44 years 6 months.

For the sole purpose of determine said retirement age, this age shall be deemed to be that at which the worker would have been eligible to retire if he/she had continued paying in during the period spanning between the materialization date of the risk and turning the legal retirement age that applies in each case.

Once these reducing coefficients have been applied, the amount of the resulting pension may not be greater than the amount which would result from reducing the maximum pension limit by 0.5% for each quarter or fraction of a quarter a worker retires in advance.

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The framework for early retirement of self-employed workers and the options available for a good pension

Retiring early can entail certain penalties. Nevertheless, it may be an option that you consider in any case. If that is the case, it is important that you plan as much in advance as possible, so that you can cover the shortfall that a pension reduced by the aforementioned coefficients can cause in your level of income.

There are, nevertheless, various ways to make early retirement a success if you are self-employed, above all if you plan ahead. Let's take a look at two potential options:

  • Pension plan. There are products available that offer excellent returns, starting at extremely low contributions. Moreover, these contributions are deductible in your annual income tax return. If you are self-employed, no doubt you know how important it is to deduct expenses, right? Well, in this regard, a pension plan can be an excellent way to add to your deductible expenses.
  • Life insurance. This is another alternative for ensuring a hardship-free retirement. Have you stopped to consider the possibility of suffering from a disability which, without rendering you fully disabled, could prevent you from receiving the full pension you are entitled to and from working in your profession? In such a situation, a high-quality insurance benefit could undoubtedly save you from hardship.

As you can see, early retirement for self-employed workers is well worth considering in advance. Bear in mind that, in this case, you are dependent on yourself, so you would do well to plan it thoroughly. At, you can take a look at our range of pension plans which you can use to start planning for a worry-free retirement, today.

Therefore, if you are self-employed, take your retirement by the reins with the help of a prestigious institution such as BBVA. This is a decision that you will undoubtedly be thankful for having made in the future, whether you retire at the ordinary retirement age or early.

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