Retiring early. Probably the biggest reason to retire early these days is to try your hand at a different kind of job or perhaps just work part-time. Fewer people have pensions from their employers, so there's less of a need to work a set number of years or reach a certain age in order to be able to tap your benefits in retirement (pension, or defined benefit retirement plans are based on those criteria).

For those of you lucky enough to have traditional pensions, the possibility of taking a reduced pension at an early age (usually age 55 is about the earliest this is offered) can be appealing. The pension offers a base level of income that you can count on (well, most of the time; if a company goes bankrupt you may get less than you expected). That may give you the freedom to quit your current job and go do something else you might enjoy more.

Regardless of whether you have a pension or not, you'll need to think about your expenses before you tell your company you're leaving. The biggest expense people neglect to consider when they contemplate early retirement is health insurance. The earliest you can get Medicare is age 65. So if you retire before that age, you either need a retiree health plan from your former employer or you'll have to buy private health insurance. That can be expensive.

Early retirement also requires better cash flow planning. That's because you can't tap your traditional IRA until you are age 59½ or you'll owe a 10 percent penalty as well as ordinary income tax on your distribution. There are ways around that penalty (called 72t distributions), but they lock you into very rigid distributions over the greater of five years or until you are age 59½. So try to avoid them if possible.

You can take distributions from your company retirement plan (like a 401(k) or 403(b) plan) before age 59½ without penalty. (You would owe ordinary income tax on distributions, but that would be the case no matter what your age.) To do that you must be age 55 and separated from service (either due to retirement or termination). Just make sure you know what your plan's rules are - I've seen plans that allow only one distribution per year and plans that let you take distributions any time you choose.

If you're contemplating early retirement, you also need to consider other company benefits like deferred compensation plans or stock options. If you start early enough, you can set up your deferred comp so that it is paid out over a series of years between your early retirement date and age 59½. Most companies have restrictions on how quickly you must do something with your stock options. Again, I've seen a wide variety of policies; some force you to exercise within 30 days of retirement while others allow you to hold the options until the grant expires.

If you think you can live on less money than you need now, you may want to test that theory before you actually retire. Many people continue to spend as much as they did while they were working - sometimes more, if they play more golf or take more trips. My suggestion is to try living on a reduced income well before you retire. See how you feel about giving up some expenses before you turn in your retirement paperwork.

You'll need to think about your income sources too. You can take Social Security payments, assuming you are eligible, as early as age 62. (If you are a widow or widower, you can start at age 60.) But if you think you may want to work part-time, you may not want to do that. If you are under full retirement age and earn more than $12,960 per year, the government will take back $1 for every $2 you earn over that threshold. The rules are even trickier in the year you turn your full retirement age.

My advice is to wait until you are fully retired to take Social Security - you'll get more money by waiting longer, and you won't have to give back part of your benefit. Once you hit full retirement age, you can work and still get 100 percent of your benefit.

Retiring late. If you're really worried about outliving your assets or you just love your job, you may want to wait until closer to age 70 to retire. Social Security will pay you a premium (above and beyond your full benefit) to wait. You also won't have to worry about early distribution penalties from retirement accounts if you retire after age 59½. If you have a traditional IRA, you will have to start taking minimum distributions by age 70½.

The downside to retiring later is, of course, that no one knows how long they'll live. So you might get shortchanged on your long-term leisure time. One way to deal with that is to do the fun things you really want to do whether you're working or not. If you've never really thought about what you'd do in retirement, try making a list of all the things you might like to do. After you do that, see how many things on your list could be done right now with a little more flexibility in your work schedule.

I've seen people who are very reluctant to retire who found it easier to phase into retirement by scheduling longer and more frequent vacations from their current jobs. That gave them a chance to see how it felt to do some other activities.

Retiring at full Social Security age. People are living longer and Social Security has started delaying the age at which you are eligible for full benefits based on when you were born. Most people will probably choose to retire about at the age when they will get full Social Security benefits. But with careful planning, you can really make "retirement" a time when you live a more fulfilling life - no matter what your age.

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