Financial News & TipsAlan S. Moore / L’Observateur / June 30, 1999Corporate “downsizing” has become so common that it hardly rates as news any more – unless you’re one of the affected employees. The commonalternative to outright firings is to offer a buyout package that strongly encourages early retirement. The theory is that the company will achievenet savings from lower salary costs and a leaner organization. Usually,you’ll hear of a buyout offer on the company grapevine before it’s officially announced as your “opportunity” to retire early. It is likely to bean offer that’s yours to refuse, but the reality may be that if you do, you will be terminated soon with a lesser or no package. Or, possibly, you mayget a sweeter offer later. If you think you may be about to receive an earlyretirement offer, there are five things you should consider: Step Back And Think About Your Plans You have three major choices: Get another job, work for yourself, or retire.
Published 12:00 am Wednesday, June 30, 1999
You’ll need a decision on direction sooner not later, because your direction could affect what you do about your package. If you want to move on toanother job, you should get moving fast, because it’s much easier to get work if you are still working. There’s usually a comfortable periodbetween the offer and the expected retirement date. Try hard to linesomething up before your retirement takes effect. Also, if you know youwant to keep working, you may want to hold off receiving the retirement package for as long as you can. But if you are trying to start your ownbusiness, you will probably need to gather up as much capital as you can, including cash from your early retirement package. If you elect to retire,you may want to put the entire package into an investment program.
Talk To A Professional It’s smart to go over your specific offer and plans with your professional advisor to get a review of both the immediate impact and the long-term effect on your situation.
Size Up Your Offer Carefully There is no standard offer, but the “sweeteners” you may see can include a selection from benefits like these: a cash bonus, lump-sum payment of retirement plan benefits, some salary continuation, a credit of extra years of service in your retirement plan, insurance coverage, continuation of medical benefits for a time, outplacement services, and stock options. Youneed to consider the particulars of your package with respect to your own plans.
Know The Tax Situation Distributions from tax-qualified retirement plans are usually taxable.
That will reduce the cash you have available. Also, you can trigger apenalty if you are too young when you take your distribution. You should beable to defer tax on your distribution until you need to receive it by rolling over your money into an IRA. Or, if you meet the age requirements,you may be able to use forward averaging options to minimize the tax you owe on a retirement plan distribution. Check with your tax professional.
Can You Negotiate? Your offer may be standard, offered to all the employees in your category of service and age. Such an offer may not be negotiable. If you havereceived an individual voluntary separation offer, negotiation may be very possible. You don’t have to take or turn down the first offer. You may needa particular benefit that’s not in the package or changes in the benefits that are included. Ask, and you may get your benefits. Don’t ask, and youcertainly will not get them.
An early retirement can be an excellent opportunity or a long-term problem – if you can’t make it fit well into your plans. Talk to a financialprofessional about your unique situation.
(Alan S. Moore is a financial advisor of Legg Mason Wood Walker Inc., adiversified financial services and securities brokerage firm that is a member of the New York Stock Exchange, Inc. and SIPC.)
Back to Top
Back to Business Headlines
Copyright © 1998, Wick Communications, Inc.
Internet services provided by NeoSoft.
Best viewed with 3.0 or higher
