Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to AskKaren@mpt.org and post your comments below.

6

December

Should I take a buyout?

Karen Gibbs

Karen, what should I consider when deciding whether or not to take a buyout offered by my employer?

- David, Columbia


Older lady with gray hair David, if you’re over 50, chances are that, at some point, you’ll be offered a buyout by your employer.   Many companies use buyouts to cut their labor costs by cutting employees.  It’s a more palatable way of getting rid of workers than a layoff.  But make no mistake; if you’ve been offered a buyout, your days are numbered.


Assessing where you are in your career is a critical first step.  How old are you?  How long have you been with the company?  What are the possibilities of you landing another, similar paying job?  What do you want to do?  Are you ready to retire?


Next, talk with your human resources department and find out just what’s included in the buyout package.  Oftentimes a lump sum payout is offered, calculated on your age, salary and years of service.  While the amount may seem generous at first glance, will it be enough to bridge the gap between now and your full retirement age?  Will it be enough to make up the difference between your current salary and a new job at a lower salary?  Will it be enough cash to fund a new endeavor?  Will your employer offer job search or job training assistance?


What about health insurance?  You can continue your current employee health plan for a limited time through COBRA, but you are responsible for the insurance premiums, which can be quite high.   Will they offer some form of health insurance for you and your family?  What about retiree health care benefits? Medical costs are the number one expense for retirees.What about your pension and/or your employer sponsored savings plan?  Will they give you a lump sum option or an annuity?  Will it come with survivor benefits?


What happened to your accumulated sick days, personal leave and other perks?  Can they be monetized?  Talk with your human resources department about the package.  Everything is negotiable.  Then go over the numbers with your accountant or financial planner.  Make sure you understand everything before signing anything.


Early retirement may mean less social security, but could give you the freedom to try something you’ve always wanted to do.  So you should ask yourself it you want to take the buyout or take your chances.


Good luck!

- Karen

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