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4 Reasons to Accept a Buyout Offer (or Severance Package)


Over the years, baby boomer clients and friends have asked me whether they should accept their employers’ buyout offers. Here are four reasons to accept your company’s buyout offer (or severance package).

Many companies looking to reduce headcount offer employees a buyout package to encourage them to leave voluntarily. These offers cover employees across all levels of experience, but are often structured as early retirement packages geared to older workers.

Here are four reasons to accept your company’s buyout offer:

  • There’s a target on your back. If your company identifies you as a good candidate for a buyout offer, this generally means you are on their list. In my experience, those who turned down the first offer invariably find themselves out of a job within a year or so.
  • The first offer is likely as good as it’s going to get. A number of years ago, a friend called me to discuss a buyout offer he had received from his employer, Motorola. Given his age and the offer’s favorable terms, I strongly encourage him to take the package. He turned down the offer and stayed with the company for about a year. Then, sadly, Motorola dismissed him, and the financial terms of his separation were not nearly as favorable as those of the initial buyout.
  • Sweetened terms and incentives. Every situation is different, but I’ve seen buyout offers that included such incentives as extended medical coverage, years of service added to a pension calculation and additional severance pay. Extra incentives might include training and job search help. In many cases, these buyouts provide incentives for older workers to take early retirement, allowing them to receive early pension payments.
  • This could be a great opportunity. While most people don’t like losing their job, a generous buyout might be a great opportunity for you. If you will continue to work and you are able to find a new job quickly, the buyout is a nice financial bonus for you. This situation might also serve as an opportunity to start your own business. If you were looking to retire in the near future, the timing is perfect. More than one client over the years joyously accepted their company’s early retirement incentive.

In analyzing whether to take the buyout, at a minimum consider the following:

  • Your current financial situation: What impact will this have on your overall financial plan and goals, such as retirement and sending the kids to college.
  • What you might do next: Retirement, self-employment, look for another job.
  • If you will stay in the workforce what are your employment prospects?
  • Health insurance options.
  • How good are the offered incentives?
  • Can you or should you try to negotiate a better package?

Corporate buyouts and early retirement packages are clearly here to stay. If you are a corporate employee, especially one in the baby boomer or the Gen X age range, give some thought to what to do if an offer appears.

If you’ve been offered a buyout or early retirement package, check a retirement planning calculator tool. At the very least, a retirement planning calculator tool will help you determine your readiness for retirement, which will be a key factor in your decision, especially for older workers.

While this is an excellent tool, please remember the results only provide a first step in the retirement planning process. This is not a substitute for an in-depth financial plan done by a qualified financial professional.

MYRA provides personal finances for international and multicultural families in the United States. Our services include financial planning, investment management, and tax preparation.

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