• Less time in pension plan, and so potentially smaller payments
  
  
• Smaller Social Security benefits
  
  
• Less in personal investments in either tax-deferred or taxable accounts
  
  

• More time in your company pension plan
  
  
• Qualify for the maximum possible Social Security benefit
  
  
• Have more time to make personal investments

THE EFFECT, IN $s and ¢s Financially speaking, the biggest downside of retiring early is having less income. The most obvious reason is that you're not working. But retiring early can also mean a reduction in the retirement income on which you were planning.

To begin with, you'll accumulate fewer years of contributions to your retirement plan. Since you typically earn the highest salary at the end of your career, retiring early may mean losing contributions based on those amounts. The consequence is usually a smaller pension check than you might have received had you stayed longer.

If all or part of your pension comes from a traditional plan, the amount may also be reduced to offset the greater number of years you are expected to collect - though that policy isn't the same with every employer. Sometimes a pension is based on your salary and the number of years you've worked rather than your age when you retire. In other cases, you can retire with full benefits at age 55.

If you apply for Social Security at 62, the first year you're eligible, you'll receive a smaller benefit each year for life than if you begin collecting at the full retirement age. People born before 1938, for example, collected 80% of what they would have been eligible for had they started benefits at age 65. But people born in 1938 or later are eligible for a smaller percentage at age 62 because the age at which full benefits are paid has increased (It was 66 for people born in 1943 to 1954, and is increasing gradually to 67 for people born in 1960 and later). You can find the specific percentage you'd qualify for, based on the year you were born, on the Social Security website, www.ssa.gov.

THE INVESTMENT DIFFERENCE Choosing to retire early can also have an impact on your investments. You'll have to stop adding assets to certain tax-deferred accounts when you're no longer earning a salary. You may have less money to invest in the ones that don't have contribution restrictions. And if you start drawing retirement income from your accounts, they will have less time to grow undisturbed.

One solution is to continue to invest even after you're eligible to withdraw or actually begin withdrawing. You can reinvest your earnings in individual securities or purchase a variable annuity , also referred to as a flexible premium annuity. And, if it's financially possible, you can postpone withdrawals from tax-deferred plans. With a traditional IRA, for example, you can wait until you are 70 1/2, and with a Roth IRA there's no required beginning date.