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Big Decisions

The Truth About Taking a Package

Know what to do if you're offered a buyout or early retirement.

Q:  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 severance 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). They have offered outplacement courses to help with a résumé 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

A: Mel, this is a difficult decision. At 53, you have at least 10 to 15, or maybe more, years ahead of you to work. Don’t think about the terms of the buyout. Instead, ask yourself these questions:

  • How financially secure is your industry and your employer?
  • Do you enjoy your work, or could you see yourself prospering elsewhere?
  • Do you want to finish your career with your current employer?
  • 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. Right now, you still have considerable flexibility that you may not have in three to five years.

Another concern is this: 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 percent of employees? Say what they will, employers tend to lay off 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 your all at work.

The decision to accept the buyout is no less difficult. The basic question is whether or not 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 a job in which 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 expect?

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