General Motors’ recent announcement that it would offer voluntary buyouts to 18,000 salaried workers was a reminder that even amid a booming economy, some companies still try to trim their labor expenses and boost their bottom lines by encouraging employees to leave. According to a new report from outplacement firm Challenger, Gray & Christmas, U.S. employers announced in October that they plan to cut 75,644 jobs, the most in more than three years.
For older workers close to retirement, the decision on whether to accept a buyout — or stay put and risk being laid off — can be a difficult one that potentially affects their retirement income and health care expenses. That’s why financial professionals advise them to carefully weigh pros and cons and try to negotiate a package that’s best suited to a worker’s circumstances.
Kurt Hemry, president of Ironwood Wealth Consultants in Portland, Ore., reminds older workers that taking a buyout has potential Social Security implications. “Benefits are based on your 35 highest earning years. For most people, their income is higher at the end of their career, so not having those higher years could lower your future Social Security benefit,” he says.
It’s also important to consider how a buyout could affect health care costs. “If continued medical insurance is not part of your parting package, then you must add this new expense to your monthly budget,” Hemry notes.
Hemry says a worker negotiating a buyout must decide whether more money or benefits is more valuable. “Perhaps your spouse is employed and you can have medical insurance on their plan,” he says. “In that case, go for the money. Or it’s the other way around, and you really need the insurance coverage more than the money.”