What You Need to Know About Your Severance Package
In times of financial upheaval, companies often offer severance packages and/or early retirement to some of their employees. The truth is that by doing this, a company can release someone with years of experience and a commensurate salary, replacing that person with someone who has less experience and can be paid less. Whether or not to take the early retirement or severance can be a stressful question, especially because there’s often a limited time in which to make the decision.
There’s a lot to consider when making this kind of decision. You might be offered a severance package when you’re already nearing retirement age. Do you take the severance or retire early? The severance package may be substantial, but will it cause you to miss out on retirement benefits?
For a person who is not quite at retirement age, a large severance package may be attractive, but is it worth looking for another job? Entering the job market in middle age can be risky. On the other hand, if you’re being offered a severance package, your company may not be doing very well. In that case you could be at risk of losing your job in the near future anyway, which would make taking the offered severance a good idea.
Something that’s important to consider is your health insurance. If you’re suddenly out of a job, where will you get health insurance? More importantly, how will you pay for it? If you opt for COBRA, will you have to pay for the whole thing, or will your employer contribute? Can you possibly move to your spouse or partner’s insurance? Every situation is unique. Severance packages are based on a dollar amount for a certain number of weeks, based the number of years you’ve worked for the company. When you look at the health insurance costs the package might seem less appealing.
If you’re offered a severance package, in some cases you can negotiate a better one. To do this, first conduct some research to determine what you should reasonably be able to expect. Then, gather relevant information about your length of employment current earnings, awards you’ve received for successful service, and anything else that demonstrates your value to the company. Be calm and confident, and once the package is offered, look for areas where it might be increased. If there’s a noncompete agreement included in the package, you may be able to use that as leverage. If the company is unwilling to increase your offer, ask for an extension of benefits. Severance package negotiations are not always successful, so be prepared to politely accept a refusal. If you are successful in your negotiation, make sure to get it in writing as soon as you can.
If you need help deciding what to do about the severance package you’ve been offered, Nelson Financial Planning can help. As one of the best financial planning firms in Central Florida, we provide guidance and financial advice so that you can make informed decisions about your future. We believe you should enjoy your retirement, so we’ll work with you to create a plan for a stress-free future. Call (407) 307-3061 or contact us today to set up your free consultation.