Hi, mother offered early retirement, seeking advice!

[zwiepak]

Evening folks,

I've been doing a lot of internet research regarding early retirement which seems to have been forced upon my mother, but seems to only get me so far. This is a bridge for which she is the first in the family to cross, so I wanted to see if I could get some advice from those whom situations might be similar...

She's 61 years old, and will turn 62 in April of '09. Last week, her company sent out early retirement offers to, supposedly, everyone over 50. Problem is, my mother wants to work until she's at least 66, if not, as you probably know, her SS benefits are significantly less. The offer they've made, in conjunction with her SS and 401K, just really isn't enough for her to live on (it comes close, but just not enough, particularly when you factor in health insurance costs). She's a retail employee, so her income is relatively low to begin with. To sum it up, there is a very real chance she would have to sell her home, which doesn't have that much equity in it anyway (and for perspective, she lives in a modest home with a 130K mortgage left (house is worth approx. 160, it's not as if she's trying to maintain a high standard of living, but rather get by on her small home, and simple living expenses))

Question I have (and I know it's a loaded question), is what might happen should she refuse the offer? I get the very bad feeling if she refuses the offer, a few months down the road, she'll suddenly get laid-off or fired for some reason. She has been with this employer for 14 years now, and suddenly, within the last year or so, they've given her all sorts of other "new" work she has to be successful in, which ultimately resulted in a not too stellar review. In other words, I truly believe they've been "stacking the deck" against her. After 14 years of service (winning awards along the way), she's suddenly not doing great ...and now herself, and others her age, have received these early retirement offers.

Currently, my inclination is she should take it, as the risk of "losing it" is just too great.

Anyone have any thoughts, comments, opinions, on this?

Thank you, it will be much appreciated....

 

[bbbamI]

There are two things have popped in my mind. How easy would it be for her to get another job in her area? If she took the package, could she receive unemployment benefits?

 

[Achiever51]

Tough situation to be in. As you are probably well aware, it is against the law to discriminate against an employee on the basis of age (as well as a number of other reasons.) Unfortunately, however, there are any number of ways around those laws...and you put your finger on one of the most popular ones. From your descriptions, it does sound like perhaps your Mom's employer is "making the case" for a possible layoff or dismissal should she not take the early retirement offer.

 

[samclem]

Problem is, my mother wants to work until she's at least 66, if not, as you probably know, her SS benefits are significantly less.

You might want to check on this by using the calculator on the SSA web site. If I correctly recall the way the benefits are calculated, her benefits--if she waits until 66 to start them--likely won't be much different whether or not she works the next few years. This might not make a big difference in the overall scheme of things, but it might be worth your time to actually put the figures in and see.

Three other questions:
-- How does the $$/month compare (taking the early retirement vs. on-time).
-- Does she have health insurance now (as an employee)?
-- Would the company provide health insurance if she took the early retirement offer?

Health insurance is a real potential problem. Even if she's very healthy now, she's got 4 years until she qualifies for Medicare. Lots could happen.

It's a little difficult coming to grips with the scope of the problem and teasing out possible solutions without getting into the actual numbers (expected SS amount, 401K balance, pension amounts, etc), though I understand why they aren't here.

 

[mews]

Yes, health care is the kicker - this might be worth negotiating about - more $$ or keep her on the plan at a modest cost - if the employer just wants the expensive people to go away.

18 months on COBRA - ask what the monthly cost to her will be.

ta,
mews

 

[samclem]

A little more on SS benefits. I used the SS calculator (at this link) and did two test runs. In both cases the person was born in 1947 and started drawing SS benefits at age 66.
Case 1: Individual earned $25k per year from 1981-2008. Monthly SS benefit starting at age 66: $1355
Case 2: Individual earned $25k per year from 1981 through age 66. Monthly SS benefit starting at age 66: $1431

Obviously, you'd want to run your Mom's numbers through, these samples are only intended to show the basic trend of stopping contributions now.

 

[chinaco]

You are doing the right thing. She needs to do an analysis pronto.

• What will she get from the company if she goes (severance/benefits)?
  • Can she replace the job (similar work conditions/pay/benefits)
• What will she get if she stays (assuming she worked till 66)
• Do the math.

Keep a few things in mind:

• She can probably draw unemployment for a certain period of time while she is looking for a job
• It is good that she is considering if she can afford to retire... many just wing it and hope for the best.
  • Take inventory of her current expenses and use those along with expected retirement expenses to do the analysis.

 

[donheff]

Take the pension that is offered now -- ERISA will protect it. Find another job and take SS at 66.

 

[Moemg]

Welcome , I also agree with take the pension now .

 

[zwiepak]

There are two things have popped in my mind. How easy would it be for her to get another job in her area? If she took the package, could she receive unemployment benefits?

Tough. However, she is very industrious. The "chatty", social type. I predict she'll find something kind of on/off, for about 1/2 of what she's making now, which is about $14/hr. She's in the Tampa Bay area, and unemployment there is relatively high.

Presumably, she is able to receive SS benefits. I've been monitoring her PEBES statement for years (and immediately requested a "fresh" one as soon as I found out about this), however, I think there's a cap on what she can earn if she's receiving SS (looking into that now).

Also, thank you all for your posts, they are extremely helpful.

 

[zwiepak]

Tough situation to be in. As you are probably well aware, it is against the law to discriminate against an employee on the basis of age (as well as a number of other reasons.) Unfortunately, however, there are any number of ways around those laws...and you put your finger on one of the most popular ones. From your descriptions, it does sound like perhaps your Mom's employer is "making the case" for a possible layoff or dismissal should she not take the early retirement offer.

Exactly. The laws, in my opinion, are hollow. Too easy to get around. Aside from that, the CEO has openly stated, after stating 3rd quarter results, there will be layoffs. Which makes any age discrimination case even harder to prove I would imagine.

They are also trying to gauge whether or not she's going to take the offer. She recently got called into her supervisor's office to see if she received the plan, and what she thought of it... The sad part is, from what I gathered from the conversation, her supervisor, in not soo many words (and this is the part no one can prove outside of an actual legal recording), told her if she didn't take it, there could be layoffs in the future, whereas the option would be lost. Now I know that's really skirting a legal line, I know she needs to have a REAL option... ...but like you mentioned, too easy to get around.

 

[zwiepak]

You might want to check on this by using the calculator on the SSA web site. If I correctly recall the way the benefits are calculated, her benefits--if she waits until 66 to start them--likely won't be much different whether or not she works the next few years. This might not make a big difference in the overall scheme of things, but it might be worth your time to actually put the figures in and see.

Three other questions:
-- How does the $$/month compare (taking the early retirement vs. on-time).
-- Does she have health insurance now (as an employee)?
-- Would the company provide health insurance if she took the early retirement offer?

Health insurance is a real potential problem. Even if she's very healthy now, she's got 4 years until she qualifies for Medicare. Lots could happen.

It's a little difficult coming to grips with the scope of the problem and teasing out possible solutions without getting into the actual numbers (expected SS amount, 401K balance, pension amounts, etc), though I understand why they aren't here.

In her case, the difference is enough to make a significant impact. From her last PEBES statement earlier this year, it's $741 vs. $1,034.

As for your three questions:

1. I'll be getting the package in the mail tomorrow, so I'll be able to look at it in depth. However, my ROUGH estimate, is early retirment will yield her about $1,200 (that's between the SS estimate as of early this year, and what may or may not, be the "gross" amount offered), and she needs about $1,800 to $2,000, as her mortgage is $1,200. Her 401K is about 20K, and her equity is about 30K (...and I think 30K is a reasonable, conservative, estimate). ...and that's it, that's all she has to work with (thankfully, she has no debt, car is paid off, no credit cards).

2. She has health insurance now through her employer.

3. Will see when I get the offer... She was, essentailly, to distraught to effectively communicate what was in the offer over the phone, and "legalese" has never been a strength of hers...

 

[zwiepak]

A little more on SS benefits. I used the SS calculator (at this link) and did two test runs. In both cases the person was born in 1947 and started drawing SS benefits at age 66.
Case 1: Individual earned $25k per year from 1981-2008. Monthly SS benefit starting at age 66: $1355
Case 2: Individual earned $25k per year from 1981 through age 66. Monthly SS benefit starting at age 66: $1431

Obviously, you'd want to run your Mom's numbers through, these samples are only intended to show the basic trend of stopping contributions now.

Yup, went there... However, their computer system couldn't "find" her... I have all her prior PEBE statements, so we're going to have to call that dreaded "800" number!

 

[chinaco]

If worse comes to worse... and you want/need to help her out, here is an idea.

The main problem with her situation appears to be the mortgage. Getting rid of that will help her financial situation.

You could do the following:

• Pay her house off with your money and have it deeded to you. For the 30k in equity, you can let her live in the house till she dies or has to go to a nursing home, etc.
• Also in consideration for living in the home, she could pay you a modest rent to cover prop taxes, house insurance, repairs, etc.
• You could sell the property when she passes.

It is not an investment, but you could help her and recover your money and perhaps make a modest return.

However, I would not go in debt to do that deal... I would only do it if I were in solid financial shape with assets to pay the house off that would not jeopardize myself.


The other option is dump the house and try to rent something that cost less.

 

[samclem]

Yup, went there... However, their computer system couldn't "find" her... I have all her prior PEBE statements, so we're going to have to call that dreaded "800" number!

Definitely follow up with SS to get her earnings history figured out. Meanwhile, there are a number of calculators at the SS site--the one I (tried) to link to is one where you manually enter the earnings history numbers. If you've got her old tax returns or another record of what SS says she earned, you could type that in and do some "what if" concerning the impact of not contributing for the next few years.

I'm really surprised that the difference is $300 per month (approx 30%). Maybe we're talking about different things--that 30% reduction sounds about right for somebody stopping their contributions AND taking their SS benefits early (before reaching 66).

 

[travelover]

I have no idea what will happen in your mom's case, but I can say that in my own case, I took the early out and in the next wave of cutbacks, there were no more early out offers - only firings.

Looking back, I am so grateful that I didn't risk it. I also felt at the time like I was on the chopping block and as more reductions occurred, my head was sticking farther out each day.

 

[Walt34]

They are also trying to gauge whether or not she's going to take the offer. She recently got called into her supervisor's office to see if she received the plan, and what she thought of it... The sad part is, from what I gathered from the conversation, her supervisor, in not soo many words (and this is the part no one can prove outside of an actual legal recording), told her if she didn't take it, there could be layoffs in the future, whereas the option would be lost.

That sounds clear to me, although I've spent little time in the real world of business/retail. If it was my mother I'd tell her to grab the money and run.

Realistically, it doesn't sound like she has the resources to fight that battle and the outcome is uncertain.

 

[KB]

You might call her health insurance company and see what the cost would be to roll over to an individual plan vs the usually high cost of COBRA.

Ask what plans they have for someone shifting from employer paid health insurance to individual plan. They might have a conversion plan which is a guarantee coverage plan at a cost somewhere between the COBRA and Individual plan.

 

[bubba]

Based on what you've shared, if she were my mother I'd suggest she take the offer and immediately start looking for another job. I know of two people who stalled the looking for new work until unemployment ran out and now can't find anything. She might not find work, but she has to look. Hopefully she will receive a severance package and can find work within a few months. But, again, from all the to-and-fro between your mom and her employer, things are looking bleak.

 

[FIRE'd@51]

I'm really surprised that the difference is $300 per month (approx 30%). Maybe we're talking about different things--that 30% reduction sounds about right for somebody stopping their contributions AND taking their SS benefits early (before reaching 66).

I think you are talking about different things. I interpreted OP's post to mean if she took SS at 62 rather than waiting until 66, in which case she would get 75% of her age 66 benefits.

 

[HpRyder]

Take the offer. Negotiate if you will, but take the offer in the end.
My wife's company dissolved their local office and offered a termination bonus or transfer to a different company department, located much farther away. We took the money and ran. Within 6 months the other department was decimated with layoff, without any "golden boot". The additional money boosted her SS earnings and maxed out her unemployment. With several unemployment extensions and marginal part time jobs to earn enough to re-qualify for the unemployment extensions, she kept income coming in for about 2 years.

Many years ago NG was laying off and offered a close friend a termination package of money and a retirement years credited bridge. He took it. Later, after the company down turn became really apparent, the upper management got "golden parachutes" and everyone else got a "brass boot".

Take the money and run. Sort things out later.

 

[mews]

another thought - if your mother takes the $$, can she ask that the severance is paid to her in 2009 - another year's earnings, as far as SS.

ta,
mews

 

[JohnP]

Zweipak - I think that you are getting good advice above!

Your posts have described your mother's situation as if there is no husband involved; there are situations where she could collect SS based on an ex-spouse's SS record provided that they were married more than 10 years. Perhaps she is a widow... at 60 she could collect a spousal survivor benefit and still work.

www.socialsecurity.gov covers the info

The following from SS

How divorce affects your future retirement benefits

If you are divorced after at least 10 years of marriage, you can collect retirement benefits on your former spouse's Social Security record if you are at least age 62 and if your former spouse is entitled to or receiving benefits. If you remarry, you generally cannot collect benefits on your former spouse's record unless your later marriage ends (whether by death, divorce, or annulment).

If your divorced spouse dies, you can receive benefits as a widow/widower if the marriage lasted 10 years or more. Benefits paid to a surviving divorced spouse who is 60 or older will not affect the benefit rates for other survivors receiving benefits.

In general, you cannot receive survivors benefits if you remarry before the age of 60 unless the latter marriage ends, whether by death, divorce, or annulment.
If you remarry after age 60 (50 if disabled), you can still collect benefits on your former spouse’s record. When you reach age 62 or older, you may get retirement benefit on the record of your new spouse if they are higher. Your remarriage would have no effect on the benefits being paid to your children.

Hope this is helpful.

JohnP

 

[Moemg]

Since you said she lives in Tampa Bay area she could probably sell the house and find an apartment for a lot less than $1200 a month .

 

[zwiepak]

Zweipak - I think that you are getting good advice above!

Your posts have described your mother's situation as if there is no husband involved; there are situations where she could collect SS based on an ex-spouse's SS record provided that they were married more than 10 years. Perhaps she is a widow... at 60 she could collect a spousal survivor benefit and still work.

www.socialsecurity.gov covers the info

The following from SS



Hope this is helpful.

JohnP

I wish... I know this sounds like a made-for-tv-Lifetime-channel movie, but her boyfriend (whom I consider my stepfather), died suddenly months before being married in 2000. ...and no, they didn't live in a State where "commonlaw" rules applied.