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Deferred retirement is normally understood to be a delay of the date at which an employee chooses to leave the work force. The term can also be used to refer to the deferral of the receipt of retirement benefits until a future point in time. In some instances, deferred retirement and postponed retirement are used interchangeably, while in other settings each term has meaning that sets it apart from the other.
When an employee chooses to work beyond the usual retirement age, this is commonly known as deferred retirement. For example, if the usual retirement age is set at sixty-five years of age, the employee may exercise his or her option to continue working until reaching the age of sixty-eight or seventy. Depending on the way that the employee’s pension or other retirement programs are structured, opting to work a few more years may increase monthly disbursements from those plans. This is sometimes the motivation for choosing to work an additional three to five years.
It is not unusual for government entities to offer their employees both postponed and deferred retirement options. While the actual structure of these options may vary, most do have some sort of basic criteria that employees must comply with before being eligible for either type of plan. For example, the plans may require that the employee have at least ten years of continuous or cumulative service in order to participate in the deferred or postponed plan.
When discussing the difference between a postponed and a deferred retirement plan, the focus is often on the way that benefits are disbursed, as well as when the employee actually retires. A postponed retirement plan may in fact allow the employee to retire early, such as at the age of sixty-two. However, payouts from the pension or other retirement plan do not commence until the former employee reaches the age of sixty-five. With a deferred retirement plan, an employee chooses to work a few more years, and begins to receive benefits immediately after retiring.
There are no universal rules that clearly define the difference between what constitutes postponed and deferred retirement. In some cultures, the terms are utilized to describe the same set of circumstances. In others, there are clear distinctions drawn between the use of each term. For this reason, it is very important to determine what local customs apply when referring to either type of retirement arrangement before entering into any serious discussion regarding retirement options.