Voluntary Retirement Offers: What You Need to Know Before Deciding

Dennis O'Keefe |

If you haven’t been living under a rock, you know that employment figures are anemic for the past 12-24 months.  Large employers such as Verizon seem to be committing to reducing tehri workforce in the coming years to stay competitive.  Talking with several non-management employees, there is even a rumor of a union EIPP offer later this spring.  

 

Recently, I spoke with a HR professional who confirmed that voluntary offers are carefully crafted to elicit a specific number of acceptances.  If too few employees accept an offer, a straight layoff may follow.  Unfortunately, firms don’t always share their facts and figures with us – making this decision even more difficult.

 

The Risk of Waiting

Taking a voluntary offer now could mean receiving 40 percent more compensation than an involuntary layoff later. Voluntary packages often include health insurance benefits, limited control over your departure date, and more generous severance terms. Those who decline may face involuntary separation with significantly reduced benefits months later.

 

In one instance, a client understood that his specialized role offered him an opportunity to delay an eventual layoff.  But he chose the 25 weeks of severance over working for three to four additional months and possibly receiving only unemployment as a result.

 

Assessing Your Personal Situation

Before accepting. . . or rejecting. . . a severance offer, you need to do your homework.  Modeling your retirement projections is a vital first step.  You can have your advisor do this or use online tools offered by Fidelity and others.  If you go it alone, remember the software is not assessing the accuracy of your inputs.  Garbage in, garbage out.  

 

In addition, you need to account for future expenses.  This might be college tuition or a planned major home repair or vehicle replacement. 

 

Lastly, you need to honestly evaluate your job in the next five to ten years.  What will AI do to your position?  Are trends moving away from your specific role? Think about how many retail employees have lost their jobs as our spending habits have changed.

 

Taking Action Now

Companies rarely announce future layoffs – voluntary or not.  What can you do to prepare yourself for a potential separation?  

 

  • Retraining on the company's budget prepares you for future opportunities. Your firm likely allows for reimbursement of education expenses.  Use this time to build your skills – especially if your job title may become extinct in the future.

  • Build cash reserves in case of sudden separation. While everything may work out, what if it doesn’t?  Having a cash reserve will help you weather the lean times and allow you to maintain your standard of living longer during your not-so-planned sabbatical.  

  • Consider working with a financial advisor who has guided clients through similar transitions. Their experience can help you avoid costly mistakes and identify opportunities automated calculators miss.

 

Whether you accept a voluntary offer or prepare for potential involuntary separation, professional guidance and early preparation make the difference between a smooth transition and financial stress.

 

If you have specific questions about your situation, we are here to help.  And check out our podcast on this topic:

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