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3: Analyze Your Decisions

Considering Early Retirement Packages

retirement alarm clock

Sometimes employers will offer incentives to retire early. If you are offered an early retirement package, you need very carefully to weigh the financial incentives against what you may be giving up. Take your time, work with a financial advisor, and find out answers to these questions:

  • What can your employer do to help with health insurance until you can get Medicare (age 65)? Can your employer provide gap insurance or help with COBRA payments until you can take Medicare? Can you afford to get insurance on your own?
  • How is your employer figuring years of service? Is there a date to which you can work that would increase your severance payments? Is your employer giving you any additional years toward pension plan benefits?
  • Will the buyout amount cover your lost wages and contributions to retirement accounts? Can you afford to take the buyout and take retirement early?
  • Do you have an option for taking monthly payments instead of a lump sum payment? Is there any flexibility in the timing of payments? (Generally, the value of pension paid at retirement age will be greater than payments received today.)
  • What if you decline the buyout? What is the likelihood of future buyouts or less lucrative layoffs? Can you negotiate longer health insurance benefits or postpone the date of the buyout?
  • Will there be any other employer-provided early retirement benefits such as career counseling and outplacement services?
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