Voluntary retirement offer

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go2027
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Joined: Tue Jun 08, 2021 11:12 pm

Voluntary retirement offer

Post by go2027 »

Hello - Looking for some "second" opinions.

The company that I've worked at for 15 years is offering me a "voluntary" retirement. I will be 59 in August. The offer is basically $232,000.00 payout. I would also still be eligible to collect my pension at 65, which will be $2400.00 per month. My SS at 67 will be $3000.00.

I have about $275,000.00 in company 401k and $225,000.00 in taxable brokerage account.

My current annual compensation is $170,000.00 in salary, $65,000.00 in bonus, and $60,000.00 in company stock. If I can hang on at the company until 65, my pension will be ~$5,000.00 per month.

The driver / temptation is that when I hear "voluntary," I feel like "non-voluntary" isn't far off. Also, even though I enjoy what I do, I'd love the possibility of retiring and letting the stress go! However, the reality is that I don't think this offer plus my current accounts would allow me to retire. I am not married, but live with my partner, she and I have relatively low expenses. Mortgage, but less than $1000 per month.

My analysis is I'm better off holding on as long as I can. Even if they do let me go after another year, I will get another year of a decent salary / compensation package - $298,000.00. Not to mention, standard severance for me would be $100,000.00

Although I could most likely get another job, it's a bit of a gamble at my age.

Interested to see if anyone sees this as a good opportunity.

Thanks a bunch!
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anon_investor
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Re: Voluntary retirement offer

Post by anon_investor »

go2027 wrote: Fri Jun 11, 2021 9:52 pm Hello - Looking for some "second" opinions.

The company that I've worked at for 15 years is offering me a "voluntary" retirement. I will be 59 in August. The offer is basically $232,000.00 payout. I would also still be eligible to collect my pension at 65, which will be $2400.00 per month. My SS at 67 will be $3000.00.

I have about $275,000.00 in company 401k and $225,000.00 in taxable brokerage account.

My current annual compensation is $170,000.00 in salary, $65,000.00 in bonus, and $60,000.00 in company stock. If I can hang on at the company until 65, my pension will be ~$5,000.00 per month.

The driver / temptation is that when I hear "voluntary," I feel like "non-voluntary" isn't far off. Also, even though I enjoy what I do, I'd love the possibility of retiring and letting the stress go! However, the reality is that I don't think this offer plus my current accounts would allow me to retire. I am not married, but live with my partner, she and I have relatively low expenses. Mortgage, but less than $1000 per month.

My analysis is I'm better off holding on as long as I can. Even if they do let me go after another year, I will get another year of a decent salary / compensation package - $298,000.00. Not to mention, standard severance for me would be $100,000.00

Although I could most likely get another job, it's a bit of a gamble at my age.

Interested to see if anyone sees this as a good opportunity.

Thanks a bunch!
Is your pension already fully vested? If so, how much would it increase if you managed to hang on one more year.
WyomingFIRE
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Re: Voluntary retirement offer

Post by WyomingFIRE »

My reaction is that you urgently need to understand how much you are spending. I think you have a spending issue, at core, instead of a question about an early retirement package.

You also need to estimate your expenses in retirement, starting most notably with health care.

Under all scenarios, you are on the cusp of retirement given your age. Plus your employer has already put the topic in play. Retirement is upon you even if you can eke out a couple more years.

I think you urgently need to understand why as of age 59 your savings only amount to about 1.5x your annual income.

Where did the money go? Where is it going? Very soon, the income will end.
Topic Author
go2027
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Re: Voluntary retirement offer

Post by go2027 »

I made a leap to a different level in the company, so my income has doubled in the last 18 months due to bonus and stock.

My savings are low, not due to spending habits, but due to giving up the majority of what I had in a divorce. I have also helped fund 3 college educations for kids. At this point, I have no debt, house is in my partners name. I am also currently on track to save / invest 50%+ of my salary this year and as long as I stay at current job.

I am fully vested in my pension. Increases ~$500.00 each year up to 65.

Thanks.
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Wiggums
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Re: Voluntary retirement offer

Post by Wiggums »

go2027 wrote: Fri Jun 11, 2021 9:52 pm Hello - Looking for some "second" opinions.

The company that I've worked at for 15 years is offering me a "voluntary" retirement. I will be 59 in August. The offer is basically $232,000.00 payout. I would also still be eligible to collect my pension at 65, which will be $2400.00 per month. My SS at 67 will be $3000.00.

I have about $275,000.00 in company 401k and $225,000.00 in taxable brokerage account.

My current annual compensation is $170,000.00 in salary, $65,000.00 in bonus, and $60,000.00 in company stock. If I can hang on at the company until 65, my pension will be ~$5,000.00 per month.

The driver / temptation is that when I hear "voluntary," I feel like "non-voluntary" isn't far off. Also, even though I enjoy what I do, I'd love the possibility of retiring and letting the stress go! However, the reality is that I don't think this offer plus my current accounts would allow me to retire. I am not married, but live with my partner, she and I have relatively low expenses. Mortgage, but less than $1000 per month.

My analysis is I'm better off holding on as long as I can. Even if they do let me go after another year, I will get another year of a decent salary / compensation package - $298,000.00. Not to mention, standard severance for me would be $100,000.00

Although I could most likely get another job, it's a bit of a gamble at my age.

Interested to see if anyone sees this as a good opportunity.

Thanks a bunch!
I would continue to work with the goal of getting closer to Medicare and SS. You will get the same package if the company decides to let you go. It’s helpful to know your retirement expenses, if you need time to work on that.

Good luck to you.
Fat Tails
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Re: Voluntary retirement offer

Post by Fat Tails »

I agree with you. Try to hold on and continue to save more for retirement.

Cheers
“If you would be wealthy, think of saving as well as getting.” ― Benjamin Franklin
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David Jay
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Re: Voluntary retirement offer

Post by David Jay »

How much money do you need in retirement? If you don’t have that number, you can’t determine if you can retire.

Specifically, if you can get by on $5400 a month, I believe that you can take the offer and retire.

You would need to spend about $400K ($64,800 x 6 plus 36,000 x 2) to get to SS + pension, leaving you with 300K to grow and provide “fill-in” as your pension purchasing power drops over the years.

But again, it all comes down to expenses.
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LittleMaggieMae
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Re: Voluntary retirement offer

Post by LittleMaggieMae »

What are your prospects for getting another job? Can you replace your current income by switching jobs?
If you take the "voluntary retirement" does it mean that you cannot work in your field or for another employer?
Or are you really at the end of your employability and once you no longer work for your current employer you will never be able to find a job at your old salary or at your new salary?

Keep in mind "retirement" doesn't always mean "I'm no longer working and living off my savings".
BernardShakey
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Re: Voluntary retirement offer

Post by BernardShakey »

I would hold on as long as they'll keep you or until you get close to 65, whichever comes first. Your salary, bonuses, and pension growth make each additional year of work pretty lucrative relative to your current nest egg. If you can get a better handle on your expenses, you could go earlier.
An important key to investing is having a well-calibrated sense of your future regret.
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oldcomputerguy
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Re: Voluntary retirement offer

Post by oldcomputerguy »

This topic is now in the Personal Finance forum.
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beyou
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Re: Voluntary retirement offer

Post by beyou »

The decision has so much to do with details you have not provided and specific to you and your company.

What is their financial situation ? Growing or contracting ?
A firm that is struggling may NOT make a better offer later and let you go with less, severance is not guaranteed.

Are you happy to keep doing your new role ? Do you feel you are valuable to them in this role (and if so why the offer or was this offered to many/most employees).

Just because it may be more beneficial to work to 65 doesn’t mean that will happen, you need to decide if they will allow you to do so and you can tolerate another 6 years.
Jack FFR1846
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Re: Voluntary retirement offer

Post by Jack FFR1846 »

Do the math. If you're close, you could consider leaving and getting another job. Even if you just go work for Lowes (there are help wanted signs all over the stores), you kick in more Roth money every year and get discounted insurance.
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winterfan
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Re: Voluntary retirement offer

Post by winterfan »

I too am under the impression that "voluntary" retirements really aren't all that voluntary. How sure are you that you can even hang on for another year? I'd be inclined to take it and find another job.
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Watty
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Re: Voluntary retirement offer

Post by Watty »

Be sure to look at your numbers in after tax dollars and also include the value of any other benefits like health insurance or a 401k match.

Be cautious about counting the value of a possible bonus since that might not happen if the company is having financial trouble or they are not happy with your performance.
go2027 wrote: Fri Jun 11, 2021 10:24 pm I made a leap to a different level in the company, so my income has doubled in the last 18 months due to bonus and stock.
.....
The driver / temptation is that when I hear "voluntary," I feel like "non-voluntary" isn't far off.
I would agree.

Being offered a severance package like that 18 months after a big promotion like that does not sound good. Either they are not happy with your performance in the new position or the business has changed because of the pandemic that started at about the same time as you got the promotion.

I would agree that maybe the "writing is on the wall" for you there especially if they are not offering the severance package to everyone to reduce the headcount. Even when there is a company wide severance package offer it is not unusual for key people to be discreetly told they are not eligible for it.

With the level of pay that you are getting OK job performance may not be good enough, they may be expecting for you to excel in your job.
go2027 wrote: Fri Jun 11, 2021 9:52 pm Not to mention, standard severance for me would be $100,000.00
If the company is having financial problems then I would be cautious about counting on that unless you have a contract that guarantees it. Often after the first round of voluntary severance packages the severance packages in the next round of involuntary severences are reduced a lot. Several times I have seen rounds of layoffs go something like;

1) Great voluntary severance package.
2) Mediocre involuntary severance package.
3) Two weeks pay in lieu of notice and a security guard walks you to the door.

After a round of layoffs the people that are not laid off often find that their jobs become a lot worse since in addition to their own job they have to do the work of the people that were laid off. A few months after a round of layoffs it also is not unusual for more people to resign because they started looking for other jobs because of the uncertainty. The people that then leave voluntarily are often the better people who have an easier time finding some other job. If you have a dozen people in your department now and six months from now there are less than nine people who have to do the same amount of work then you my envy the people that left.

If there likely going to be widespread layoffs then you also need to consider what your job will be like after the other people leave.

It is a complex decision, I don't see a clear choice one way or the other. If you do take the severance package then being able to retire or not really depends on your expenses.
Last edited by Watty on Sat Jun 12, 2021 8:17 am, edited 1 time in total.
namajones
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Re: Voluntary retirement offer

Post by namajones »

go2027 wrote: Fri Jun 11, 2021 9:52 pm The driver / temptation is that when I hear "voluntary," I feel like "non-voluntary" isn't far off.
This would be my concern, as well. Unless you were a name drawn out of a hat, I'd take this as a sign and weight that consideration more heavily in what no doubt will be a complex decision that no one here can fully weigh in on because we do not have all of the information that you do.
Last edited by namajones on Sat Jun 12, 2021 8:17 am, edited 1 time in total.
humblecoder
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Re: Voluntary retirement offer

Post by humblecoder »

If it were me, I would not take that offer.

People mention that possibility of an involuntary separation. Even if that is a possibility, I'd still not take the package. At worst, you'll get $100K, an additional X months at your high salary level, and you have to find another job (which you would have to do anyway if you take the offer). If you are able to stay another 6 months or more, then you will come out ahead by not taking the offer:

Difference between voluntary and involuntary payout = $232K - $100K = $132K
6 months salary = $295K * 1/2 = $147.5K

Plus you get the pension boost. Plus you get the Social Security boost from working another year at a high salary. Plus you don't have the uncertainty around finding another job.

The only situation where I would consider it is if you had an equivalent job already lined up, so you could pocket the $232K and still maintain your current salary.
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Watty
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Re: Voluntary retirement offer

Post by Watty »

I thought of one more thing that has not been mentioned yet.

If you have not done it yet be sure to talk to your manager about how you are doing and what your prospects with the company are. :oops:

When asked directly they may say taking the package would be a good idea, or reassure you that your job is secure. Even if they do not say something that direct just by the tone of the conversation and their body language you may be able to get a good clue if you are being forced out or if they would hate to see you leave.

One caveat to that though is that sometimes decisions about who will be laid off may be made at a higher level and your manager may not know everything that is going on. I did not work at that level but one time I was at a company that was having a series of layoffs and I was talking to a VP I knew about waiting for the next round of layoffs. He said it was all done but then two weeks later he was laid off. I believe that he was probably telling me the truth about thinking the layoffs were all done, he just did not know the plans for the next round of layoffs.
dbr
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Re: Voluntary retirement offer

Post by dbr »

At Megacorp there were many instances of voluntary retirement packages. These were never targeted at individuals but rather offered division by division for business reasons and had to be non-discriminatory by age, gender, etc. I would be very worried if this is a personal offer, but I bet it is not.

I would probably reinforce the suggestion that it is time to understand what the retirement plan is. That starts with knowing what one intends to spend. At this point the rough estimate is what a previous poster suggested of $5500/month plus whatever can be produced from $300k which might be another $1000/month. This is $78K a year. It might be a problem here is that not enough has been saved to support a lifestyle one wants.

A possible conclusion from that is that retirement at this time is not feasible and that one will have to take one's chances with the current position and/or investigate other employment and means to save more money. I think I agree this is not an opportunity and that one should hold on as long as possible.

At Megacorp I seemed to always be in a business that was successful enough to never offer a buyout. For some people these were just amazing gimmes, but, as mentioned, eventually the offer dwindles to "good-bye, nice knowing you." And my company has/had a long record of successful performance to this day.
Outer Marker
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Re: Voluntary retirement offer

Post by Outer Marker »

go2027 wrote: Fri Jun 11, 2021 9:52 pm My analysis is I'm better off holding on as long as I can. Even if they do let me go after another year, I will get another year of a decent salary / compensation package - $298,000.00. Not to mention, standard severance for me would be $100,000.00
This is sound reasoning. Unless you know the company to be in distress and downsizing, I would not worry too much about being forced out with a less attractive package.
Miguelito
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Re: Voluntary retirement offer

Post by Miguelito »

WyomingFIRE wrote: Fri Jun 11, 2021 10:12 pm My reaction is that you urgently need to understand how much you are spending. I think you have a spending issue, at core, instead of a question about an early retirement package.

You also need to estimate your expenses in retirement, starting most notably with health care.

Under all scenarios, you are on the cusp of retirement given your age. Plus your employer has already put the topic in play. Retirement is upon you even if you can eke out a couple more years.

I think you urgently need to understand why as of age 59 your savings only amount to about 1.5x your annual income.

Where did the money go? Where is it going? Very soon, the income will end.
Yikes. That's an awfully quick leap to judgement.
KlangFool
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Re: Voluntary retirement offer

Post by KlangFool »

go2027 wrote: Fri Jun 11, 2021 9:52 pm
The offer is basically $232,000.00 payout.
go2027,

Any idea on how they pay out this money? One lump sum and you have to pay a lot of taxes? Or, it is spread over many months. At your income level, this will be a very big deal.

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