Should You Take that Early Retirement Offer?

In 2017, US companies offered early retirement, or “buyouts”, to nearly 5,000 employees. That number has lagged this year, but some analysts predict a surge of buyout options during the fourth quarter and continuing into the near future. If you’re age 55 or older, you could be offered an early retirement buyout at some point in the next few years… But should you take it?

An early retirement can appear tempting, but make sure you’ve asked yourself the following questions:

Where will my money come from? Without a regular paycheck, you have to generate income somehow. You won’t be eligible for Social Security yet, not that you should solely rely upon those benefits anyway. Withdrawals from your 401k plan will be subject to a 10 percent penalty, if you haven’t yet reached age 59 ½. So, what’s your income plan?

Will I have health insurance coverage? Will your employer offer continued healthcare coverage for a limited amount of time, or could you negotiate that into the deal? What about after that time period? Will you qualify for healthcare premium subsidies, or will you need to pay for the entire cost of your insurance plan? You won’t be eligible for Medicare until age 65, so make sure you’ve correctly calculated the cost of health insurance up until that point.

Am I free of debt? Transitioning to a lower, fixed income will feel much easier if you have paid off all large debts. Otherwise, continuing to work a few more years is often the more prudent plan.

Do I have another job possibility? Sometimes, those who refuse a buyout find themselves laid off or otherwise unemployed in the near future, anyway. Buyout offers are often a sign that the company needs, not wants to, downsize. If you have other job possibilities, or starting your own business is a dream you’d like to pursue, accepting the buyout can be a smart move. It just doesn’t mean you actually retire.

If you’re mulling over an early retirement offer, or just want to be prepared for the future possibility, give us a call. We should perform a check-up on your retirement plan anyway, and together we can make a backup Plan B in the event a buyout opportunity ever presents itself.