Five Factors to Consider When Offered Early Retirement

Information for Verizon and Other Corporate Employees

 

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Many companies are beginning to offer early retirement to their employees. We often receive questions from employees who have worked for a company for many years and have been offered a buyout plan. If you’re offered a buyout by your employer, there are many factors to consider before deciding if this is right for you. Only you can know if the offer is suitable for your current situation, but here are some factors to consider to help you decide:

What Next? If you take the buyout offer, what do you plan to do next? Will you look for a similar job with similar pay? Will you be able to live off a job with a smaller salary? It is also very important to consider your marketability in a job market where many are unemployed or underemployed.

Can You Afford It? A worry-free retirement plan should include income for up to 30 years. In addition to all your living expenses, you should consider any increased healthcare costs that may arise. If you cannot quality for Medicare yet, make sure your buyout offer includes a suitable plan for health coverage. Buying your own health insurance can be a costly monthly expense, especially for older people who may have existing health issues.

How Does This Affect Your Social Security? Your social security benefits may be impacted by taking a buyout offer. Your benefit is calculated by your average earnings over 35 years. Typically, at the end of your career is when you will be earning the most. If you retire early, your calculated benefit may be less. If you are unable to maintain your expenses after your buyout, you may need to claim social security benefits before the full retirement age and receive less than your full benefit.

What If You Say No?   If you aren’t sure whether to accept a buyout offer or not, consider what might happen if you reject the offer. Many people who deal with this uncertainty feel that they could be laid off in the near future if they don’t accept the offer.

What about Taxes? If you accept a lump-sum offer from your employer, this is regarded as taxable income unless you roll it over into another account. If you take your buyout as income, you could pay a significant amount in taxes and possibly be moved into another tax bracket. Where should you place your lump sum benefit and more importantly, your 401k? Moving it into an IRA account will offer more options and flexibility to safely earn returns without stock market risk.

Taking an early retirement can be an exciting opportunity to explore new avenues in your life. It’s okay to be unsure about such a big decision, but take time to factor in all the possibilities. The Older Workers Benefit Protection Act (OWBPA) allows for 21 (for single employee) to 45 (for groups or class of employees) to consider the offer. Take your time.

 

If you’d like to schedule a free consultation to discuss safe money strategies for an early retirement offer, call us 1-866-988-8858 or fill out a contact form and someone will contact you.

 

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