Evaluating an early retirement package? Items to consider.
By Crystal Prachyl
When considering an early retirement package, review the aspects of the package and the reason the specific company is offering an early retirement package. An early retirement package can offer an employee a large lump sum payment or a series of multiple annual payments over a specific period of time based on current salary. Consider the tax impact of the severance payout, for example, if you are accepting an early retirement package at the end of a tax year, you will likely end up paying more in taxes because you will have collected a year’s worth of income plus a one-time payout from a company. If you have unvested stock or stock options, will you be able to keep this employee benefit upon accepting the package? Will you also receive a payment for any unused vacation or personal leave? Also, consider medical benefits as well when reviewing an early retirement package. Will the company provide group insurance for a specific period of time, or will you need to obtain private health insurance from early retirement age through age 65 when you can apply for Medicare? When considering if you should get another job or fully retire, it is important to evaluate your full financial situation by going through a financial analysis that reviews your age, the number of years you will need income, balance sheet and income sources. The financial planning process and output of the results based on goals and income will help determine if you need to find another way to create income outside of Social Security. Consult with an outside attorney the terms of the package you are accepting before you accept the offer.