Requirements for early retirement

Everything you need to know to retire early.
Are you near statutory retirement age? Many working people would like to retire early but do not know what the requirements are to do so. There are many factors to take into account when beginning the process. This article covers all the different types of early retirement, and the requirements you must meet to be eligible for them.

What is early retirement?

Early retirement is a retirement option that allows certain workers who meet the given statutory requirements to retire before the standard retirement age that applies to them. But be careful! Each year you must check the retirement age, since it rises gradually year on year. By 2027, the standard age of retirement will be 67 years, except for anyone who has made social security contributions for at least 38 years and 6 months, who will be eligible to retire at 65.

There are various types of early retirement and, consequently, differing requirements depending on the kind of retirement you wish to seek. They are early retirement following involuntary termination and early retirement following resignation. Spanish Act 27/2011, of August 1, on the updating, suitability and modernization of the social security system, governs all elements relating to retirement. New requirements for retirement came into force in 2013, when they were published in the Official State Gazette. Below you will find a summary of the retirement types and the requirements for each one.

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Early retirement following involuntary termination

This follows the dismissal of the employee, causing them to leave the job market early due to objective grounds of corporate restructuring. In such an instance, retirement age can be brought forward by four years when the following requirements are met:

The person must be registered or equivalent in the social security system when they apply for retirement.

  • They must have made social security contributions for at least 33 years, which may include up to one year of military service or another kind of voluntary service.
  • The person's employment contract must have been terminated on any of the grounds envisaged in Article 6 of Royal Decree Law 5/2013 of March 15.
  • The person must be, or have been, a job seeker for at least six months immediately before applying for retirement.

It is important to remember that the self-employed are not eligible for this kind of early retirement.

Early retirement due to resignation

This is the option that the worker chooses of their own accord, and not as a result of dismissal or mandatory termination. In this case, the retirement age can be brought forward by two years when the following requirements are met:

  • The person must be registered or equivalent in the social security system when they apply for retirement.
  • They must have made social security contributions for at least 35 years, which may include up to one year of military service or other kind of voluntary service.
  • The resulting pension amount must not be less than the minimum pension amount that the worker would be entitled to given their family situation upon standard retirement age.

The employed and the self-employed are eligible for this kind of early retirement. There are other special cases that allow certain workers to bring forward the statutory retirement age:

  • People who were members of mutual societies until January 1, 1967 are eligible for retirement from the age of 60. Other groups are included in this condition:
  • RENFE employees who joined the company before July 14, 1967.
  • Employees of FEVE, concessionaires of public railways and Ferrocarriles Vascos, SA who joined those companies before December 19, 1969.
  • Workers included in the special coal mining scheme until February 1, 1969 and who paid into any of the coal mutual societies until January 31, 1969.
  • Workers covered by the special sea workers regime until August 1, 1970.
  • People who were dismissed before April 1, 2013, and who have not registered again with social security are eligible for the scheme in force until December 31, 2018, allowing them to retire at 61.

If the person eventually wishes to retire early, they must be aware of the resulting cuts to their pension for their entire retirement. The reduction is calculated taking into account the amount by which the statutory retirement age has been brought forward and their years of social security contributions. It will also depend on the kind of early retirement opted for.

As a result, early retirement is suitable only for those people who, after calculating the pension they will receive, have sufficient funds to cover their expenses and needs, have made all the social security contributions required or are already going to receive the maximum pension allowed by law.

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How to calculate the pension from early retirement

The amount of the pension to be received can be calculated by applying the corresponding reduction ratio. This amount will be reduced based on the number of quarters, or fraction thereof, that the worker needs to reach the legal retirement age and the length of the certified contribution period.

  • If you have made contributions for less than 38 years and 6 months, the reduction ratio applied will be 2%;
  • If it is equal to or greater than 38 years and 6 months but less than 41 years and 6 months, it is 1.875%;
  • If the contribution period is between 41 years and 6 months and 44 years and 6 months, it is 1.75%;
  • If the contribution period exceeds 44 years and 6 months, it is 1.625%.

Moreover, once these reduction ratios are applied, the amount of the resulting pension may not exceed the amount that would result from reducing the maximum pension limit by 0.5% for each quarter or fraction of a quarter a worker retires in advance.

At BBVA.es you can find plenty more information on early retirement and all the factors you must consider when making this decision. There are also several pension plans that can help you to get the most out of your money, whether you are about to retire or are already retired. Also available

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