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Are corporations trending toward retirement buyout/packages with high cash stocked up and a need to lower aged employee to hire young, innovative employees?

Will we see more corporations offering special retirement packages due to high cash flow and the need to turnover their workforce? If so, what should a potential retiree look for in a package?

Apr 02, 2012 by C from Foristell, MO in  |  Flag
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3 votes
Don Level 19

I don't believe this is an increasing trend nor do I think buyout packages are an overt way to churn the workforce. I think buyout packages are mainly intended to reduce employer cost; the benefit of "rejuvenating" the work force is incidental.

If you are near retirement then you need to acknowledge that accepting a buyout could be risky. It is difficult to find employment - especially in this job market, if you are well over 50. Taking the offer could be a wise move if doing so positions you well for a secure retirement. But if securing your future would require finding another job of similar compensation - and you don't have that lined up already - you may be better off staying put.

Another consideration is how secure you feel with your present employer. Sometimes voluntary buyouts don't meet their cost reduction targets and turn into involuntary terminations, with reduced packages. If you think your employer might go that route and are not confident that you wouldn't be on that list, then you might consider the package even if it does not secure your retirement. In this scenario you are trading off one risk against another, so do so only after considerable thought about how you would handle the worst case scenario of each option.

Comment   |  Flag   |  Apr 02, 2012 from Middlebury, VT

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I haven't followed this issue very closely. A lot of my client's are self employed or small business owners. I know companies do this though. I think everyone’s situation is different. If you have a good job I don't think I would take a buyout unless I was either young enough to start over and my skill set was in high demand or close enough to retirement age and financially independent enough to not care. The things to look for would be what’s the payout (3 months, 6months, 1 year pay). Are they offering health benefits? If you have benefits through your spouse could you take the payout and work as a consultant for the same company without the benefits or maybe a competitor? Do you have to sign a no-compete agreement? This is a touchy subject. Spend a lot of thought on this and review your financial plan to set where you are in the process before making such a big decision. Good Luck.

Comment   |  Flag   |  Apr 02, 2012 from Loveland, OH

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Adi Benyishay Level 13

Corporations have tried for a long time now to replace some of their older employees. In most cases it is a cost saving tool. Often they can hire two young employees for the same pay as one older one.

Additionally, in some cases it is done as a way to reduce the future pension liabilities (Defined Benefits), and set the employees up with defined contributions like the 401(k). There isn't any retirement liability for the employers offering 401(k), comparatively speaking.

Comment   |  Flag   |  Apr 05, 2013 from Southampton, PA

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There are several considerations when evaluating a buy-out offer/early retirement package, including: Do you have an emergency fund in place to carry you through to your next job or into retirement? What will happen to your healthcare coverage if you are not yet eligible for Medicare? Will you receive a severance package (and if so, how will it be taxed?)? If your current employer offers a pension plan, will you be credited with extra years of service even if you terminate now and take the buy-out offer?

For more information, here's a link to an article I helped develop for the National Endowment for Financial Education: http://www.myretirementpaycheck.org/work/buy-out-offers.aspx . Be sure to take your time in making this decision, if possible.


Comment   |  Flag   |  Apr 03, 2012 from Orland, IN

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