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The Golden Handshake

September 4, 2013

Things to consider if you are asked to take an early retirement.

Increasingly, companies offer to buy out older workers with early retirement
packages. When times are tight, they justify it by citing that younger workers are cheaper to employ. If you’re offered an early retirement window, here are some important factors to think about before accepting any buyout …

The income factor. Take a look and see if you might be able to take early distributions from your 401(k) starting at age 55 without a penalty. Under certain circumstances, you can. Now, if you have a pension plan, the income distributions will likely be age-weighted, so accepting an early retirement package may lower your pension income down the road.

The insurance factor. Most companies don’t package health insurance coverage along with that severance pay. (It would be nice if they did.) So after 18 months of COBRA, you will have to start paying premiums on a private health insurance policy. (You could also arrange coverage through your spouse’s policy.) As for life insurance, some employers will actually offer to sustain it for early retirees, but the coverage can be inadequate and the cost will likely be passed on to you.

The adjustment factor. A golden handshake can be really jarring to your life. If the writing is on the wall and you have no choice but to take it, don’t be surprised if it takes 6-9 months to settle down to a new lifestyle, a new community, or a new job. If you depend totally on your job for your satisfaction in life, or if you haven’t done much financial planning early in life, you might be surprised at how entrepreneurially you have to think (if you want to remain employed) or how fast your financial mindset has to change from accumulation to preservation. If you get a large bonus as part of the buyout, you have to consider the tax consequences and your options for tax deferral.

Attention to the basics. If you have even an inkling that you might be asked to take an early retirement in the coming months, review your finances NOW. You want to wipe out as many debts as you can, build up your emergency fund, and avoid extravagances.

If you have questions about what to do in this kind of situation, just e-mail me or give me a call and we can talk about it.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by,,,,, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at

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