Are your clients considering an early retirement? Emily Brandon of U.S. News and World Report tells us 10 things to keep in mind when analyzing whether or not to accept a buyout offer.
- Consider the company’s financial health. Is the company in trouble? If a layoff is possible, it may be worthwhile to take the money and run.
- Calculate the financials. “Many pension formulas are calculated based on the average of what you earned during your last few years on the job,” Brandon reminds us. “A one-time bonus isn’t likely to be higher than working longer and having more higher earning years factored into your pension calculation.”
- Cover the expenses. All of them, for the 30 years or more your client could live in retirement.
- Make a counteroffer. It doesn’t hurt to ask. If your client is part of a small group of employees being offered an early retirement package, they may have room to negotiate a higher buyout. Brandon cites an example from Alan Sklover, a New York-based employment attorney and author: “Sklover suggests that you offer to spend the next six months bringing in more clients or business in exchange for a larger payout. It can’t hurt to ask for a little bit more money or subsidized health benefits.”
- Find health care. If the buyout package doesn’t include health care, make sure your clients have it before they accept – especially if they’re younger than 65 and ineligible for Medicare.
- Factor in Social Security. Benefits are calculated on an average of the 35 years in which you earned the most, Brandon writes, so retiring early means giving up another high-earning year in the equation.
- Review what they owe your client. Consider bonuses, commissions, and unused sick or vacation days when totaling how much your clients have earned.
- Don’t forget about taxes. Can your clients receive the payout as a lump sum or on a monthly basis?
- Read the fine print. As always, make sure your clients understand the terms of the contract their signing.
- Size up the job market. Some of your clients’ may not have a choice to stay in their current job, but that doesn’t mean they’re ready to retire for good. Clients who accept a buyout offer and find a new job right away get free money, Brandon points out. But with ever-increasing unemployment, it may be more likely that they’ll have to live on that package for a while. Even if they find a second job, they may not make the same salary they do now.