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Early Retirement Packages

“Should you accept an Early Retirement Package offered by your employer?

Financial and emotional issues can be difficult to balance.

Imagine your employer has announced it wants to eliminate several hundred jobs by offering buyouts, also known as early retirement packages, to a group of employees. What if that group includes you? You had no intention of leaving. You like your job, you’re paid well and your benefits are good. But now your employer suddenly appears to consider you expendable.

To quote a famous rock anthem – “Should You Stay or Should You Go?”

Evaluating the Financial Implications of a Buyout Package can be Difficult even if You’re More Than Happy to Go.

It gets complicated on the emotional side when you intended to be loyal but now see that loyalty has been betrayed. So, first consider the security of your job if you decide to stay. Will it be eliminated later on with a less attractive   severance package, or possibly none at all? And if you stay and the job lasts, how will you feel about working for an employer that gave you the highway option?


Your Age and Life Stage Will Greatly Impact Your Decision.

You may be young enough that retiring now isn’t an option, so the severance will be your paycheck while you find another job. Or you may have young children and decide your severance will provide income while you stay at home for a few years. If you were looking at retiring within a few years anyway, this may give you the opportunity to start early.


Evaluate the Financial Pros and Cons of Accepting.

Of course, you’ll need to evaluate the financial pros and cons of accepting or rejecting the offer. That means more than just the bottom-line cash, which companies usually calculate based on seniority and years of service. Consider bonuses, stock options, paid time off and insurance premium subsidies you will no longer receive. Consult a tax specialist about the impact of   receiving a lump sum or stretching it out over time – severance or early  retirement pay is considered taxable income. How will this affect your pension? Are there credits you stand to lose or gain? Of course, you will also want to factor in Social Security benefits. Depending on your age,   Social Security benefits may not be what you anticipated, or may not yet be available at all.

Don’t Wait until the 11th Hour.

You may have only a limited time to consider a buyout package, so it’s  important not to wait until the 11th Hour. By signing a buyout agreement, you forfeit your right to sue your employer later on regarding any employment or compensation-related issues, so resolve those before time runs out.

Buyouts often occur after a merger when duplicate positions need to be eliminated. The economic impact of COVID-19 could release a wave of corporate mergers and acquisitions as weaker companies are left in distress.  Companies may offer a staying bonus to those who don’t jump ship to ensure they have adequate staff to complete the transition. If you accept a staying bonus, you should still dust off your resume and check your finances to make sure you can survive being terminated when the transition is complete.


Take Advantage of any Extra Services Your Employer may be Offering to those who Accept the Buyout.

These services may include career counseling or placement services, even if you plan to retire, so you can walk away assured you took advantage of every opportunity. Then meet with your financial services professional to determine how your goals and objectives may change in light of the buyout. Even if you decide to stay, you may identify a need for greater cash reserves or other financial plan revisions to prepare for moving to another job if your employment future appears uncertain.

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