In today’s corporate environment, restructurings, mergers, and workforce reductions are common. For experienced employees—especially those in higher-paying positions—early retirement packages are often part of these changes.

While these offers can seem appealing, deciding whether to accept requires careful analysis. A package that looks generous on paper may fall short of meeting your long-term financial and lifestyle needs. Here’s what to consider before making a decision.

Understand the Severance Package

Most early retirement offers include severance pay, often calculated based on your years of service.
Ask:

• How is it calculated? Is it one or two weeks’ pay per year of service—or more?
• How is it paid? A lump sum might provide flexibility, but it could push you into a higher tax bracket. Spreading payments over time may reduce taxes and extend the cushion.
• Is it negotiable? Sometimes you can negotiate the amount, timing, or inclusion of unused vacation, sick time, or bonuses.

Evaluate the Impact on Your Pension or Retirement Accounts

If you have a traditional pension, retiring early may reduce your benefit amount.
Consider:

• Whether your employer offers “pension sweeteners” (e.g., adding extra years of service or age).
• How retiring early will affect your 401(k) or other retirement accounts—both in contributions you’ll miss and in withdrawal timing.
• Whether you’ll need to start drawing from retirement savings earlier than planned, which could impact long-term growth.

Review Health Insurance Coverage

Healthcare is one of the biggest expenses for retirees who haven’t yet reached Medicare eligibility.

Ask:

• Will your employer cover you until Medicare at 65, and if so, at what cost to you?
• If not, what alternatives are available—COBRA, a private plan, the Health Insurance Marketplace, or your spouse’s coverage?
• How will healthcare premiums, deductibles, and out-of-pocket costs fit into your budget.

Look Beyond the Obvious Benefits

Some packages include extras that can add significant value:

• Life insurance or extended disability coverage
• Outplacement or job-search services
• Education or retraining benefits
• Stock options or restricted stock units
• Financial planning assistance

Make sure you understand all the benefits—and the deadlines to claim them.

Run the Numbers: Can You Afford to Retire Early?

Before saying yes, take a realistic look at:

• Your projected expenses in retirement, including inflation and healthcare
• All income sources—pensions, Social Security (if eligible), investments, and part-time work
• How retiring early affects Social Security benefits (claiming before full retirement age reduces monthly payments permanently)
• Your tax situation and withdrawal strategy for retirement accounts

Consider the Risks of Declining

If you turn down the offer, could layoffs still be coming—and might future offers be less generous?
Weigh:

• Your current job satisfaction and career growth potential
• Your industry’s stability and your skillset’s demand in the market
• Whether a bridge job or phased retirement might offer a smoother transition

Don’t Rush Your Decision

Employers often give you a limited time to accept, but it’s worth using that time to consult with:

• A financial advisor (to evaluate the numbers and tax impact)
• An attorney (to review the agreement for legal considerations)
• Your family (to align financial and lifestyle priorities)

Moving Forward with Confidence

An early retirement package can be a springboard to your next chapter—or a financial misstep if not carefully evaluated. The key is understanding how it fits into your long-term goals, cash flow needs, and overall financial plan.

Navalign Wealth Partners is here to help you break down the details, run the numbers, and create a retirement strategy that works for you today and for decades to come. Contact us to discuss your options before you decide.