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Companies looking to downsize the workforce sometimes offer early retirement packages to employees who might otherwise work several more years. The buyouts often give anywhere from one week to one month's salary per year of service at the company. Other benefits, such as an increased pension or health care coverage, are possible terms of the package. Examining the benefits helps you decide if the early retirement package is right for your financial situation.
Job Loss Prevention
Companies facing a difficult financial situation may try to avoid layoffs by offering the buyout program. Employees who reject the early retirement package could find themselves without a job in the future if the company still needs to cut the staff size. By accepting the offer, you get extra money you wouldn't have otherwise received while choosing to leave on your terms. Holding out could mean a forced departure from your job without the added money and benefits offered in the early retirement package.
Advanced Retirement Timeline
An early retirement package provides an incentive for those nearing retirement to speed up the date. If you're planning to retire in the next few months to a year, the buyout amount can push your finances to a position that allows you to comfortably leave your job earlier than expected. You are able to leave behind work responsibilities without losing out on pay. If the terms of the early buyout don't fully cover what you need to speed up your retirement plans, you may have the option of negotiating the details. For example, you might convince the company to offer health benefits for a certain period of time.
Accepting an early retirement package doesn't mean your career is over. Early retirees have the option of taking a part-time job to cover expenses in retirement. Other options include starting your own business, working as a consultant in your field or making the switch to a different field. Some buyout offers restrict work options to prevent early retirees from working for a competitor or taking clients with them. Reviewing and negotiating those restrictions gives you more control over your career options in retirement.
Increased Free Time
Without a regular work schedule, the early retirement option gives you more free time to pursue other interests. Traveling becomes an option while you are young and better able to get around. You can put more time and effort into hobbies or explore new pastimes that weren't compatible with a full-time job. If your retirement savings combined with the early retirement buyout covers your financial needs, accepting the offer can reduce the stress associated with work and give you greater enjoyment of life.