If your employer offers you a sweet check in exchange for your early retirement, does it make sense to take the deal? It’s hard to say no to that boat load of Benjamins of course. But sometimes accepting a buyout arrangement is short-sighted.
I got a call from a person with this exact dilemma recently. Ben was offered a $100,000 to pack up and leave work for good. He is only 56 years old and wondered if it was a smart move or not. If you are in a similar situation, hopefully the process we went through will be helpful to you as well. Here’s what Ben and I discussed.
When your employer offers a buyout package they flood you with information and numbers. And just to add a little more pressure they give you a short window during which time you have to make one of the most important decisions of your life. This is intimidating and causes unnecessary anxiety. Slow down cowboy.
In Ben’s case the only difference between immediate retirement and staying on the job was that $100,000. In his case, his decision didn’t impact his benefits or pension. If you are in this position calmly look at your situation and simplify.
- What exactly are they offering?
- Will your decision change your retirement benefits or pension?
- If you take the package, what do you get? What do you give up?
The issue is complicated enough. Don’t jumble it up with unnecessary data.
What are the alternatives? What are the risks?
Ben could either take the buyout offer or stay at work. If he takes the package and leaves work he figures it will be impossible find another job that will replace his $85,000 a year income. On the other hand (and much more important) based on the direction his company is going, he thinks he’s got a 99% chance of being laid off within a year if he stays. He takes his chances and does get sacked; he won’t get the $100,000 he could grab today.
I asked Ben what he would do if money wasn’t an issue or worry. What did he really want his life to look like? I suggested that he decide that first and then make the financial decision that best supports what he wants for his future.
Ben wasn’t quite sure so I suggested that he think it over before making a decision. Still, his ambivalence told me he didn’t have a burning desire to stay on at work.
From a financial point of view, this is a no-brainer. Ben should take the $100,000 now and take a year to find a new job. That’s because he is certain that his job is going to be phased out within 12 months anyway.
If you are facing a decision like this, keep it simple. Too much information is going to paralyze you. Then, consider the alternatives and the risks. Then, just shut your eyes and think about the future you really want for yourself. My guess is if you go through this process, you’ll find your answer quickly and easily.
Have you been offered an early retirement package? What did you do? Why?