early retirement offers is usually the most generous.”
A company looking to reduce costs as a result of a merger may first offer a voluntary early-out package, says Derrick Winke, a registered investment advisor with Horizon Financial Planning Corp. in Troy, Michigan. If enough people take the buyout, the remaining jobs might be secure. If not, involuntary layoffs may occur, he says.
Sometimes companies do offer strictly voluntary packages with no planned layoffs, but it’s hard to gauge. You need to look at how strong your industry, your company, and your specific job and division are. If it looks like your position will be eliminated, it’s probably wise to take the offer even if you don’t feel you can quite afford to retire, says Winke.
If you think you’re in a pretty good position within your company, you can take time to weigh the value of the package. Look at the size of the pension payout. Under a traditional company-paid pension plan, your employer may offer tenure and age, resulting in a higher monthly payout.
But unless you’re close to retirement, your payout most likely won’t be as high as it would if you worked to full retirement age. “You’ll need to run some numbers with your financial advisor to determine how well you can live off the offered pension, coupled with Social Security and your other retirement savings, or whether you want to turn down the offer and keep working,” he says.
You may have some room to negotiate, says Winke, if you are a high-level executive with a long history with the company. Therefore, it’s important not to rush to accept the first offer until you’ve evaluated it carefully. You’ll have a limited amount of time t
o decide. “It’s ideal if you can get wind of such an offer before it occurs and run some preliminary numbers with your advisor,” says Winke.
Before you go…
Besides making sure you can afford to bow out early, David Demko, a gerontologist and editor in chief of Age Venture News Service, says employees should also prepare psychologically for retirement. Before you agree to that early retirement package, Demko suggests:
Make a transition. Plan to retire from one thing, such as your job, to something else that’s equally interesting. “Just don’t retire from life.”
Know yourself. Find out what makes you tick. “Ever wonder why a lot of self-employed people never retire? Their retirement reward is to be able to continue to pursue their lifelong passion, whether it’s a hardware store, law practice, or photography,” he says.
Set lifestyle goals. Because you can look forward to at least another two decades after retirement, plan to make it as interesting as possible. Start by making a list of 10 things you’d love to do if you could afford to retire.
” Look beyond the dollar sign. “One of the greatest ironies of retirement planning is that most people spend 50 years building a nest egg, but only 50 minutes making plans to stay healthy enough to enjoy it,” notes Demko.While the government and