An incentive early retirement program is an arrangement between employer and employee that provides tangible inducement or reward for voluntary early retirement. It may be a formal program or an ad hoc agreement negotiated with the institution. The most common incentives include severance pay, liberalized actuarial reduction, annuity enhancements, bridging benefit payments, partial or phased retirement, and other basically nonmonetary perquisites. Most institutions offer more than one incentive. Key factors in program development include faculty's role in the planning process, consideration of institutional characteristics and history, and federal and state regulations. Although observers do not agree unanimously on the effectiveness of such programs, most evidence supports their use. Effectiveness must be viewed from the perspectives of the needs and interests of both faculty and institution. Faculty acceptance is found to be higher than anticipated, but a possible disadvantage is the loss of valued faculty members. Incentive early retirement programs are likely to become increasingly popular as the cap on mandatory retirement is lifted. (MSE)