Benefits of taking an early pension include having an immediate income and having access to cash when other benefits, such as Social Security and Medicare, might not be available, according to Zacks Investment Research. Another advantage is being able to invest pension money, which can then be used to grow a retirement fund.
Additional taxes can be incurred by taking an early pension, mainly because it counts as early withdrawal, Zacks Investment Research explains. An employee might be made to pay more tax if his spouse is still working when he takes out an early pension. The reason for this is his income is higher than it would be if he and his spouse were both retired, which means that the spouse who took the early pension will fall into a higher tax bracket.
One of the biggest disadvantages of taking an early pension is reduced benefits in the form of lower monthly payments for the rest of an employee's retirement, notes Zacks Investment Research. These reduced benefits might not be enough to cover a retired individual's expenses or cost of living during his retirement years. Should this happen, the person may have to resort to using savings to cover the remainder of his living expenses.