Many companies offer employees a buyout package to encourage them to leave the company. This is generally done to encourage voluntary departures when the organization is looking to reduce headcount. These offers can cover employees across all levels of experience, but are often structured as early retirement packages geared to older workers. Over the years I’ve been asked by Baby Boomer clients and friends whether they should accept this offer from their company. Almost without exception I’ve encouraged these people to take the money and run. Here are 4 reasons to accept your company’s buyout offer.
1. There’s a target on your back
If your company has identified you as somebody who might be a good candidate for a buyout offer this might mean you are on their list. In my experience I’ve invariably seen folks who have turned down the first offer finding themselves out of a job within a year or so.
2. The first offer is likely as good as it’s going to get
A number of years ago a friend called me to discuss a buyout offer he had received from his employer. Given his age and the favorable terms of the buyout offer, I strongly encourage him to take the package. He ended up not taking the offer and stayed with the company for a bit over a year afterwards. Sadly, he was let go and the financial terms of his separation were not nearly as favorable as they would have been had he taken the initial buyout.
3. Sweetened terms and incentives
Every situation is different, but I’ve seen buyout offers that included such incentives as extended medical coverage, years of service added to a pension calculation, and additional severance pay over and above what an employee would have been entitled to based on their years of service. Additional incentives might include training and job search help. In many cases, these buyouts can be incentives for older workers to take early retirement and the incentives are geared to areas like the ability to receive early pension payments. It’s also important to remember that some severance packages have “claw back” provisions that reduce severance in the event that the former employee gets a new job within the severance period.
4. This could be a great opportunity
While most people don’t like the idea of losing their job, a generous buyout might be a great opportunity for you. If you will continue to work and you are able to find a new job quickly the buyout could serve as a nice financial bonus. This situation might also serve as an opportunity to start your own business. If you were looking to retire in the near future, this could be just the opportunity you were looking for.
I’ve had more than one client over the years joyously accept their company’s early retirement incentive. When analyzing whether to take the buyout, you should at a minimum consider the following:
- Your current financial situation. What impact will this have on my overall financial plan and my goals such as retirement and sending my kids to college?
- What you might do next. Will you retire, become self-employed, or look for another job?
- What is out there. If you will stay in the workforce, what are your employment prospects?
- Health insurance options.
- The incentives being offered. Are they good? Can you or should you try to negotiate a better package?
Corporate buyouts and early retirement packages are clearly here to stay. If you are a corporate employee, especially one in the Baby Boomer or the Gen X age range, you should give some thought to what you would do if this situation were to present itself.