Buyouts and Early Retirement Staff Writers

Question: I'm 53 and have been with my employer for 24 years and I really enjoy my work and colleagues. The economy has really hurt our sales and work in our plant is way down. I've had a good work history, solid performance ratings and decent raises until the past two or three years. After weeks of rumors about layoffs, almost everyone was offered what management has called a "Buyout Offer". The company has said that if not enough people take the buyout, it may be necessary to have further layoffs that may not include any incentives.

I have been offered one week of several for every year of services, or 24 weeks of pay, plus six weeks of accrued vacation. I will also continue on the employer health plan at employee rates for the same period and can then extend coverage through COBRA. My life insurance and disability insurance will end immediately. We have no pension plan but I have a good amount saved in my 401(k) plan. They have offered outplacement courses to help with a resume and my job search. This buyout sounds pretty good but I'd be giving up a lot and I'm not sure how easy it will be to find a comparable job with the economy in the dumps. I have a few weeks to decide and I simply don't know what to do. What do you advise I do? Mel - Houston, TX

Answer: This is a difficult decision. To begin, I suggest you not think about the terms of the buyout. Instead, ask yourself if you should try to complete your career with this employer or if you would be better off elsewhere. At 53, you have at least ten to 15 years, or more, years to work. How financially secure is your industry and your employer? Do you enjoy your work or could you see yourself prospering elsewhere? What is your family's financial situation and what are your likely obligations? How's your health? Would you be able to return to train for a new career? These are important decisions, and at age 53, you still have considerable flexibility that you may not have in three to five years.

Another concern is how confident are you that if you decline the buyout, that you would not be selected for an involuntary layoff if business gets even worse? Talk to supervisors and managers who will give you honest and candid feedback. Would you be rated in the top 50% of employees? Say what they will, employers tend to layoff the employees they consider to be the least productive. Also, be aware that there is an increasing tendency to retain the most experienced and capable workers. Workers age 55+ have a lower unemployment rate than younger workers.

If you decide that you want to stay with your employer, and there's a good chance you would not be chosen for layoff, the decision is made and the details of the buyout are unimportant. Decline the offer and continue to give you all at work.

The decision to accept the buyout is no less difficult. The basic question is whether you can secure a rewarding and meaningful job in your community or elsewhere if you choose to relocate. You must quickly go out and "test the waters" for suitable work. Can you find an employer where you can spend 10 to 15 years? How long might it take to find a new job? What pay level and type of health and retirement savings benefits can you obtain?

Your buyout offer is pretty reasonable. One week for every year of service is something of a norm though employers though employers may offer far less. Between accrued vacation and severance pay, you will have 30 weeks of income. If you have not found work by the end of the 30 weeks, you are eligible for unemployment insurance compensation. You should be fairly certain that you can secure your new job before your severance ends. If not, you're probably looking at an income decline while on unemployment compensation and a big increase in COBRA health benefits premiums to as much as $1,200 or more for comprehensive family coverage.

That's a lot to consider and so many uncertainties. Take your time. Discuss the decisions with family, friends and coworkers. Talk to recruiters and even try to meet with prospective employers. Ask if you can meet with the outplacement professionals before you have to decide.

Based on just the information you've provided, I am inclined to suggest you decline the buyout offer if you believe it is unlikely you will be laid off in the future and your prospects for other work are not good. Finding comparable employment in today's economy is a high risk proposition. The 30 weeks of pay sounds attractive but that time can fly by and leave you in a very bad financial state. This is a time to minimize your risks.

Question: I never thought I would have to deal with the decision my employer of 37 years asked me to make. I'm 61 and have worked with the same employer since age 24. This is the only job I know and my coworkers are family to me. I do have a pension which my employer will "sweeten" by adding four years to my length of service so my pension would be at the level as if I retired at age 65. I don't want to start my Social Security until I'm at least 66 and would prefer to wait until 70 and receive an even bigger monthly payment.

I'm not covered by employer provided retiree healthcare so I would have to pay COBRA rates until I'm 65 when I would begin Medicare. I'm in generally good health and enjoy my work though I must admit that I'm sometimes tempted to try something new as the last chapter in my working life. I don't know which way to turn. How should I go about deciding? Mary-Jane, Columbus, OH

Answer: I believe you have two fairly good choices. You can decline the offer and continue working until age 65 or so when you are covered by Medicare. You will have four more years of income and you could delay receiving Social Security at a reduced rate. Your full Social Security would begin at age 66. You would receive your full, age-65 employer pension as well. Also, you will continue to be covered by your employer health benefits. If you feel your job and employer are secure, and your content in you job, I suggest you stay on.

There are pluses and minuses to accepting the early retirement package. The first negative is that following your 18-months of COBRA health coverage, you are on your own for coverage until age 65. This will be at least two or more years costing about $5,000 to $7,000 annually for individual coverage and double that for two-person. Don't underestimate the shock of leaving you employer and coworkers of 37 years. Your workplace and colleagues are an important part of your wellbeing - physically and emotionally. How big a loss would this be for you?

On the positive side, you will collect pension benefits for four or more years than if you had waited to retire. If money is a concern, you can find a meaningful "retirement job" to work in retirement, supplement your pension and it may provide employer-sponsored health benefits. Some age friendly employers offer comprehensive and affordable health benefits to part time employees working as few as 24 hours a week.

I don't believe your's is a financial decision, rather it's one of personal preference. How would you most enjoy spending the next four or five years. You are one of the fortunate few who have the freedom to choose.

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