When your employer is looking to cut costs, there might come a time but don’t want to choose the people they let go. That’s why wealth management expert D. Paterson Cope says you might consider an early retirement offer.
In many cases, it’s not easy to make a quick decision about whether to take this offer or not, as there are many factors to consider. Here are some questions every worker should ask before making what could be a life-changing decision.
What Does the Offer Include?
The most obvious question is asking what the early buyout offer includes. First, of course, the basis for any offer will be a severance package that pays you a certain amount of money based on how long you’ve been at the company.
Some companies pay a week’s worth for every year you’ve been with the company, for example, while others may have better or worse offers. If the company is desperate for people to accept buyout offers, they may increase the amount they’re willing to payout.
You should also ask whether the early buyout offer includes salary continuation — ongoing payments until you reach a certain age — and insurance coverage. The latter may be extremely important to your decision-making process, especially as health care costs continue to rise.
Is the Offer Negotiable?
All workers should question if the offer the company presented is firm or whether they can negotiate on its terms. You should view this offer the same way you view an offer of employment after you’ve applied for a job.
Many people will accept the offer without seeing if the package can be sweetened. That’s a mistake, as some companies have some wiggle room where they can increase the buyout amount or add more perks.
How Stable is Your Job?
Regardless of the details of the buyout offer, you should ask yourself how stable your job is should you decide to decline the offer. For example, suppose that your job will be eliminated not long after the buyout offer expires. In that case, it might be worth accepting it — even if you aren’t ready to retire.
Suppose your job is eliminated after you decline the offer. In that case, you’ll miss out on the benefits and only be able to apply for unemployment insurance. On the other hand, if you had accepted the offer, you would benefit from the buyout plus unemployment insurance.
Can You Find Another Job?
If you’re not yet ready to retire, you should ask yourself how hard it would be for you to find another job. Suppose you believe you’re a qualified candidate in an attractive job market. Taking the buyout offer could be a chance for a great new start that’s funded, in part, by your buyout.
If you need a job after the buyout and the prospects seem bleak, you might consider sticking around as long as you can.
Are You Ready to Retire?
D. Paterson Cope says that all employees should assess their situation regarding retirement. Older workers who may be close to retirement age may consider taking a buyout offer if it allows them to retire early.
Suppose you were planning to retire in one year, for example, and your buyout offer would pay you six months’ worth of salary. Can you afford to retire six months early essentially? The decision may not be that simple, but the calculation and decision-making process would be the same.
About D. Paterson Cope
D. Paterson Cope, CFP® is the founder and CEO of Cope Private Wealth, a financial planning and wealth management firm specializing in assisting retirees and people who are about to retire. D. Paterson Cope has been providing financial advice for more than 30 years. He first earned the Certified Financial Planner (CFP) designation in 1997. When he isn’t working, he enjoys spending time with his wife, Jennifer Miree Cope, and the rest of his family in Mountain Brook.
