Sometimes corporations and public sector employers entice employee to opt for early voluntary retirement. So they offer certain employees a lucrative buyout package. You may reject the buyout offer but if you do so, you will be terminated soon with a lesser or no package at all. Hence, you should think carefully about refusing a buyout package. If you get such an offer, make no mistake in negotiation.
Talk to a professional tax lawyer or financial advisor: It is always better to consult your financial advisor or attorney before signing a buyout to get a review of the package and its long term effect on your financial situation.
Size up your offer carefully: There is no standard offer in early retirement buyout package. But sometimes a buyout package includes “sweeteners” like cash bonus, a lump sum payment of retirement plan benefits, continuing salary for specific period of time, extra years of service credited to a retirement plan, insurance coverage, continuation of medical benefits for a specific time, outplacement services and stock options. You need to consider the particulars of the plan.
Know the tax situation: Distributions from tax-qualified retirement plan are usually treated as taxable income. Income tax and other penalties may reduce the cash available in your plan. Also, you can trigger extra tax if you opt for early retirement at young age. You should be able to defer tax on your distributions by diverting your money into an individual retirement account (IRA). Check with your financial advisor or chartered accountant.
Can you negotiate? If other employees in your organization at the same level are offered the same buyout, your offer is probably not negotiable. If your employer is not in financial crisis and if you receive an individual voluntary separation offer, remember that this type of offer is negotiable. Possible negotiable terms could be higher cash settlement, or even allowing you to remain on staff for another year or two then getting the payout. It never hurts to ask in any case, ask, and you could end up with a better deal. If you do not ask, you will certainly not get it.
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