Understand the terms of the payout.
Your offer will likely be based on your age, longevity with the company, and salary history.
Understand the timeframe.
The deadline to notify the company of your decision and the date you’ll receive payment may be different. Know the dates that can affect you. Missing a deadline could mean you forgo your options altogether.
Determine whether you are going to stop working or look for another position.
Just because you “retire” from your current employer doesn’t mean you have to sit at home and not work. When and how you take retirement are some of the most important factors in what the best plan of action will be.
Know if there’s a non-compete clause.
If you plan on finding another job, you need to make sure the severance offering doesn’t include a non-compete clause. This is where you can’t work for a competitor for a specified period of time.
Prepare to pay taxes.
Once it’s time to start making withdrawals on your retirement assets, realize that you will have to pay taxes and possibly even a penalty, depending on your age. Taxes are also owed on pension income. Depending on when you take your severance, you may owe more to Uncle Sam than you anticipated.
Figure out your health insurance.
If you take the retirement offer, is there an option of staying with the company health plan? Health insurance is a significant cost, and access to an affordable plan may be the difference in taking the offer or working a few more years.
Collecting Social Security.
Some pension formulas include a bump-up for Social Security for retirees under the age of 62 and then decrease when you become eligible for Social Security. Your options here can be a significant factor in whether a buyout makes sense for you.
Have a financial plan.
Rely on a professional to help you develop a plan. A well-devised plan can mean avoiding costly mistakes. You may have just one chance to get this right. Don’t miss it!