Understand The Difference Between Resigning And Taking Early Retirement

If you want more time to sit on the beach, hike in Indonesia, or perfect your pickleball serve whenever you wish, you may be considering resignation or retirement. 

But how you end your career can have substantial financial and legal implications. 

That is why knowing the difference between resignation and early retirement is essential.

Why You Need to Understand Retirement vs. Resignation 

Work-life balance is essential. Many would love to be able to walk away from daily work obligations, but unfortunately, that is not always an option.

If you’re considering severing your corporate ties for a new life, make sure you understand your choices. 

Job severance can include quitting, scaling back hours, resigning, or retiring. 

When deciding between the latter two, retiring vs. resigning, there are several things to consider.

  • Other income sources
  • Pension or retirement
  • Continuation of insurance
  • Future employability
  • Short and long-term tax implications 

What Is The Difference Between Resignation and Early Retirement?

At their very basics, retirement is a decision to leave a long-term career or workforce permanently, while resignation is a decision to leave a specific job or employer.

Retirement releases you from gainful and meaningful employment, usually with the assurance of continued financial security. Most people see retirement as a reward for a life of hard work. 

man reading on tablet what is the difference between resignation and early retirement

One of the benefits of retiring vs. resigning is that retirement often includes benefits such as a financial pension or investment, sometimes insurance, and other tangible benefits. 

Retirement suggests closing a chapter and ending a productive career on amicable terms.

When one resigns, it’s often because a better job or environment is waiting, although some who are close to retirement age (or financially well-off) may decide to resign and “retire” from work altogether. 

People resign for many reasons – dissatisfaction, career advancement, family, relocation, or anger. Some even plan to leave a position, usually at the end of a project, contract, or time. 

Both resignation types are generally in search of greener pastures. But there are some drawbacks. In most cases, one loses current benefits such as the company car, credit card, or housing stipends. 

While pensions and investment accounts are usually safe, resigning (or quitting) may negate other potential benefits. And depending on the situation, abrupt severance may affect future favorable recommendations or employability.

Understanding Early Retirement 

Early retirement is leaving your career and company before the specified age. In general, the average retirement age in the United States is 67. While in France, the average retirement age is 60. 

Many companies or professions also have specific or mandated retirement ages, such as pilots at age 65.

If you are considering early retirement, it is a good idea to research all the facts. Sometimes, a few years can mean the difference between a comfortable retirement and choosing generic toilet paper.

One of the ways corporations cut costs is to offer early retirement packages to reduce management or a highly skilled workforce.

These benefits packages encourage employees to leave their jobs and are typically an option for those close to retirement age. 

A similar offer to younger employees might be called a buyout. Whether an employee is hourly or, with or without a contract, these offers can be made.

But your financial future may not be secure even with a lucrative early retirement package.

  • Individual healthcare before Medicare is expensive.
  • Drawing on your 401k and savings may cost.
  • You don’t have the benefit of a cost of living increase.
  • You are losing money by not compounding interest.
  • Extra work for a retiree may be challenging to find.

What’s Involved in Retiring Early 

Depending on your position, early retirement can take a day or a year. If you are under an employment contract, it is always a good idea to review it before taking action. 

To begin the early retirement process, submit a letter of early retirement directly to your boss or human resource department.

A retirement letter is an official notice informing a company of an individual’s departure from their position and usually includes a request for retirement benefits. 

A retirement letter should be professional and brief. In it, expressly state your intention to resign. Identify the position and title you are leaving. Giving an effective date of 6 or 12 months’ notice is common. 

Another thing to consider is your duties during the transition period. Are you expected to find and train your replacement?

woman at desk writing what is the difference between resignation and early retirement

If you have a highly specialized skill set, that could take a while. However, some companies, usually for security reasons, will accelerate your departure once notified of your intentions. 

An early retirement letter should include the following items:

  • Date of early retirement notice
  • A statement of retirement
  • Effective date of retirement.
  • A general reason for early retirement.
  • An expression of gratitude for the position and relationships.
  • A request for benefits.
  • Availability to consult or work for the company on a limited basis.

Here is a simple sample early retirement letter.

Dear [manager or human resources rep],

This letter is to inform you of my plans to retire from Acme Co., beginning June 1, 2023.

I am honored to have helped shape this company and support its mission. My 20 years at the helm of the Sales and Marketing Division have been so rewarding and given me‌ ‌a‌ ‌strong sense‌ ‌of‌ ‌purpose.

Retiring early was a difficult decision, but our children have left for college, and my husband and I are ready to travel and enjoy more time together.

I believe in Acme Co and the great people who work here. Please feel free to reach out to me should you need my input or assistance once I retire.

Thank you for the many opportunities I’ve enjoyed during my career here. Wishing you and the entire staff at Acme the very best.


[Your name]

One last thing about retirement letters. Even if there has been strain or animosity at your workplace, leave on a positive note. Refraining from insults or accusations will demonstrate maturity and professionalism.

There is also the chance that your resignation letter will become public knowledge, so put your best and last foot forward.

So now that you know how to announce your retirement, you may question why to consider early retirement.

Why Consider Early Retirement 

One of the arguments against waiting to retire until age 67 or 70 is that advanced age and health issues can prohibit retirees from pursuing new interests. This concern has led to a rapidly growing early retirement trend.

Reasons to Retire Early

People take early retirement to travel, learn a new hobby, or start a business. Some go back to college. For those that chose a demanding career keeping them away from home, this is a perfect time to spend with family, children, and grandchildren. 

Your Health and Early Retirement

Renewed mental and physical health is an often-stated reason for early retirement. And retirement, as a whole, usually results in a more positive approach to daily life.

A study from the University of Amsterdam stated that one of the key benefits of early retirement is a longer life, especially if you worked in a high-stress environment.

If you experience burnout or stress in your position, the extra time afforded in retirement allows you to take the time to sleep, relax, or get back into shape. Practicing mindfulness is a great way to start an early retirement.

Financial Reasons for Early Retirement

Winning the lottery is a good reason for early retirement. Another reason is to take advantage of an unexpected financial incentive package. 

Both of these reasons have something in common. You may be much younger than the average retiree, with familial and financial obligations and personal energy that craves focus. Early retirement can be a gift.

And with some financial and personal planning, it may allow you to pursue a new chapter in your life.

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Retirement vs. Resignation: What Are the Key Differences? 

The primary difference between retirement and resignation is that early retirement removes you from the workforce.

However, you are still able to receive a pension and benefits. But once you finalize retirement, individuals often find themselves at a loss. 

To explain the various feelings, we’ve included some unofficial “stages of retirement.”

  • Stage 1, Pre-Retirement:  Transitioning out of a long-held position.
  • Stage 2, The Honeymoon Phase: Feeling free and excited about the next steps.
  • Stage 3, Disenchantment: Finding yourself at a loss with no purpose. This stage may include interpersonal or relationship concerns.
  • Stage 4, Reorientation: You discover your new passion or reeducate yourself for something different.
  • Stage 5, Stability: Often called a second act, this is your new normal.

Here are some other key differences: 

  • A resignation can leave you jobless if you haven’t secured something before you resign. You may not have enough savings to support yourself and your family, and you likely won’t receive a severance package or benefits.
  • Those who resign without planning to work again are usually younger, earlier in their career path, or financially comfortable. 
  • Giving notice that you are quitting a job may be immediate, but it is rarely more than 30 days or less than two weeks. The average notice of resignation is two weeks or one pay cycle. A retirement notice should be longer – at least six months if possible.
  • Resigning is often associated with a less-than-amicable separation. While a resignation letter is more mature than throwing the door keys at the boss on your way out, resigning still leaves you without income (or benefits). And unless you have an independent income, the next step is looking for another position or retraining for a new career.

Resigning may not always be a negative thing. It can allow you to pursue a preferred career rather than staying in a job out of convenience or obligation.

However, individuals who resign often experience many of the same five stages of retirement – but often without the same financial security.

Most Common Questions About Resigning or Retiring 

While there are differences between resigning and retiring, both are significant decisions that require careful consideration of all your options. 

Is a retirement letter the same as a resignation letter?

Essentially, they are the same type of letter with similar information. A resignation letter provides an employer with advanced written notice that you are leaving your position, usually in a near-term or limited timeframe.

pile of paper on desk what is the difference between resignation and early retirement

Resignations can be effective immediately, in one day or one pay cycle. Resignations may or may not guarantee severance and future benefits.

A retirement letter provides advance notice of intent to vacate a position. There are usually conditions with retirement and benefits.

The periods before separation are usually longer or contract dependent.

Do you get retirement if you resign?

A retirement package depends on the position held and the length of time with a company. While each corporation is different, usually retirement pay, insurance, ancillary benefits, or lump-sum separation pay is not an option if an individual quits or resigns.

What are the benefits of retiring vs. quitting?

Quitting is usually final, with no access to retirement benefits, pay, or unemployment insurance.

And often, because of the immediate and sometimes negative nature of the action, those that say “I quit” are always provided a favorable recommendation for their next position.

Final Thoughts

Taking a beat and reviewing your needs and options before acting is always a good idea. This applies to whether you are considering early retirement or planning to resign. Whatever you decide, don’t be impulsive.

Consult a financial advisor and get the opinion of trusted friends and family. You don’t want to make such a big decision without a lot of thought and planning.

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