Decision time with a package on the table

[JonB]

I had a similar opportunity a few months back. I had been planning to retire in 2-4 years, but was offered a nice separation package. After running the numbers and bouncing them off a few advisors, I was pleasantly surprised that it looked like the financial plan had a high likelihood of success, so I made the last day of 2017 the last day of my 33 yr career at my company.

On your question about RSU/Options, since they initiated the offer, I would think your company should let you keep them on the current schedule; mine did. Also if you would be eligible for more in the coming year, they should ask them to pro-rate the amount you are granted based on the % of the qualifying period you have worked. A few other things to discuss would include paying you for your unused vacation days (over and above the 1 yr separation package), you have earned these and the company should pay you for them. Also if the company has been contributing to a 401K or retirement plan, you should also ask them to make the contribution for a pro-rated amount for the next contribution as well. Health Care is probably the biggest issue, for me since I was already “regular retirement eligible” my company provided regular health benefits for an additional year after leaving as part of the separation package and participation in the regular company retirement program after that. Not sure what your company’s retirement health care policies are, but ask for as much as reasonable!

In addition to the suggestions by others about confirming your expenses, also take a close look at your debt and the plan to pay down/leverage it going forward. Is revolving debt paid down? What’s the mortgage situation? Should you refinance while still working to reduce your monthly payment? Or should you open a Home Equity Line of Credit which could be tapped to avoid selling investments in a down market? Also do you have enough cash/equivalents to live off for a few years to ride out a bear market?

As also suggested, you can always do some consulting work on your own terms if you like for motivation or financial reasons. Perhaps it makes sense to set up an LLC to manage the opportunities if/when they come up?

Lot’s to think about! Also lot’s of emotions to deal with I am sure. Good luck, whichever decision you make will be right for you, don’t look back and second guess, just look forward to make your plan a success!

 

[augam]

I don't have an answer specifically for the OP, but I'll share that at MegaMotors they offered a generous package in year one and in year two, they just fired people. I left in year one. My boss, who agree to be the hatchet man at the beginning of year two, was axed himself once his services were no longer needed.

Warren, Dearborn or Auburn Hills

 

[Bir48die]

Buh bye!

 

[Scuba]

Are you saying that a guy who was offered a package and passed on it is not more likely to be let go in a layoff type situation?

There has to be a reason he was offered that package in the first place. Something is going on whether it's him personally or the company trying to lower. costs..

I agree with this. I think turning down such a package is very high risk. I’d try to negotiate the best deal I could from Megacorp, including healthcare (maybe they’ll cover COBRA for the full 18 months for example, maybe they’ll bump up the lump sum to help with healthcare costs), and take the package. Maybe Megacorp will also provide assistance with outplacement/looking for another job.

Separately, I’d assess my financial situation and if I felt ok with it, I’d RE. If I felt I needed more money, I’d look for alternative employment or part-time employment.

What I would NOT do is count on Megacorp to continue to employ me after offering me a package. My experience is that companies do not offer these kinds of packages to people they intend to keep for several more years.

 

[Scuba]

I had a similar opportunity a few months back. I had been planning to retire in 2-4 years, but was offered a nice separation package. After running the numbers and bouncing them off a few advisors, I was pleasantly surprised that it looked like the financial plan had a high likelihood of success, so I made the last day of 2017 the last day of my 33 yr career at my company.

On your question about RSU/Options, since they initiated the offer, I would think your company should let you keep them on the current schedule; mine did. Also if you would be eligible for more in the coming year, they should ask them to pro-rate the amount you are granted based on the % of the qualifying period you have worked. A few other things to discuss would include paying you for your unused vacation days (over and above the 1 yr separation package), you have earned these and the company should pay you for them. Also if the company has been contributing to a 401K or retirement plan, you should also ask them to make the contribution for a pro-rated amount for the next contribution as well. Health Care is probably the biggest issue, for me since I was already “regular retirement eligible” my company provided regular health benefits for an additional year after leaving as part of the separation package and participation in the regular company retirement program after that. Not sure what your company’s retirement health care policies are, but ask for as much as reasonable!

In addition to the suggestions by others about confirming your expenses, also take a close look at your debt and the plan to pay down/leverage it going forward. Is revolving debt paid down? What’s the mortgage situation? Should you refinance while still working to reduce your monthly payment? Or should you open a Home Equity Line of Credit which could be tapped to avoid selling investments in a down market? Also do you have enough cash/equivalents to live off for a few years to ride out a bear market?

As also suggested, you can always do some consulting work on your own terms if you like for motivation or financial reasons. Perhaps it makes sense to set up an LLC to manage the opportunities if/when they come up?

Lot’s to think about! Also lot’s of emotions to deal with I am sure. Good luck, whichever decision you make will be right for you, don’t look back and second guess, just look forward to make your plan a success!

Great advice re the debt. Refi of mortgage and taking out a HELOC could be some great options depending on the OP’s situation.

 

[CRLLS]

OP. You mentioned semi-retirement. I wonder if you are planning on cleaning windows at Mickey D's or will try to find meaningful PT employment in the same field. If the latter, then check to see if there are any non-compete clauses in your offered package.

 

[travelover]

Warren, Dearborn or Auburn Hills

The one that didn't go bankrupt.

 

[Spanky]

I’ll share an anecdote. A coworker was offered a package that amounted to a year’s worth of salary. He declined. Ten months later his job was eliminated and he was sent packing with three months of salary.

He worked ten months for one month of salary.

That's a bummer. Hindsight is 20/20, but one should recognize the motivation behind such a package. That is, they want you out soon. If you do not take it, you may have to settle for a significantly lesser package.

 

[Cinti_Headhunter]

As someone who has worked in Corporate HR in some large organizations I would think twice before turning that offer down. In my experiences those that declined the buyout/severance package rarely ended up better off that they stayed. There is a reason why you and everyone else is being offered the package, and I am sure it was fully vetted by HR and Management before any package was delivered.

Just my two cents.

 

[hopeisnotaplan]

OP. You mentioned semi-retirement. I wonder if you are planning on cleaning windows at Mickey D's or will try to find meaningful PT employment in the same field. If the latter, then check to see if there are any non-compete clauses in your offered package.

There wouldn’t be a non-compete, but I’m not really planning to explore anything in my current field yet. The nature of my field would allow me to go with other companies but probably not on a part-time basis. I’m hoping to use this opportunity to jump out of the 50 hour week. My most likely path would be self employment in a separate field where I have some experience and can do things at my pace and discretion.

 

[JoeWras]

Unfortunately, the scenario of someone who is offered a package, opting to pass, then being let go prior to the end of the package window is becoming more common. DW and I know several people, all early 50's, offered packages who declined. Only to be squeezed in a subsequent round of layoffs. Some of these individuals did not have enough savings to leave the workforce and didn't feel their skill sets were marketable either, so they rolled the dice. I suppose in their cases, it was an easy decision. OPs may be different.

There is a reason the package is offered in the first place, and most times it isn't due to corporate benevolence.

Its a tough call worth boarding out, but there could be a silver lining in there. Maybe...

For those who may be out of the w*rking force for a while, please be aware that the "The Package" is changing. Not just at my Megac*rp, but at many.

CFOs are getting very hard nosed about workforce reductions, and are finding ways to get to the edge on age discrimination issues.

My Megac*rp used to offer packages every now and then. No more. They just quietly dismiss people in small chunks, continuously, to make their reduction numbers. A "shut up" package is usually given at that time, but it is no where near the generous 1 yr severance. Usually just a few months.

The last package (1 yr severance) given at my Mega didn't reach the numbers they needed to reduce. Over the next few years, most (but not all) of those eligible were dismissed under the newer, less lucrative package.

I'm not sure what OP should do, but they should surely consider this strongly.

 

[audreyh1]

I don't have an answer specifically for the OP, but I'll share that at MegaMotors they offered a generous package in year one and in year two, they just fired people. I left in year one. My boss, who agreed to be the hatchet man at the beginning of year two, was axed himself once his services were no longer needed.

That is so Machiavellian!

I wonder how he felt about that. Ouch!

 

[thepalmersinking]

One word of advice regarding RSU’s and/vested options. Sell all at the first moment possible. Consider it “found” money. Myself included, have handed our asses handed to us trying to create esoteric withdrawal strategies to avoid taxes etc.. only to watch a correction or recession take us out. Look and plan with the net amount and not the gross amt. just my .02.

 

[Mr._Graybeard]

one word of advice regarding rsu’s and/vested options. Sell all at the first moment possible. Consider it “found” money. Myself included, have handed our asses handed to us trying to create esoteric withdrawal strategies to avoid taxes etc.. Only to watch a correction or recession take us out. Look and plan with the net amount and not the gross amt. Just my .02.

+1 btdt

 

[JoeWras]

One word of advice regarding RSU’s and/vested options. Sell all at the first moment possible. Consider it “found” money. Myself included, have handed our asses handed to us trying to create esoteric withdrawal strategies to avoid taxes etc.. only to watch a correction or recession take us out. Look and plan with the net amount and not the gross amt. just my .02.

I probably would have ER'd 5 years ago had I taken this advice in 1999.

 

[thepalmersinking]

Well I am thinking back to 1999 when I got a package offer and like a stupid person I volunteered to stay 6 more months to help with transition. Bang, $425 worth or options turned into $200 by the time my time was up and could exercise.

 

[RunningBum]

Well I am thinking back to 1999 when I got a package offer and like a stupid person I volunteered to stay 6 more months to help with transition. Bang, $425 worth or options turned into $200 by the time my time was up and could exercise.

I got greedy around that time (2000) and only sold a little of my options, and I had to work another 11 years. However, had I not held onto most of my options until 2000 I wouldn't have done nearly as well as I did. Also, retiring at the start of the dotcom bust would've been dangerous as I'm not sure how smart I would've been about diversifying.

 

[hopeisnotaplan]

Well I am thinking back to 1999 when I got a package offer and like a stupid person I volunteered to stay 6 more months to help with transition. Bang, $425 worth or options turned into $200 by the time my time was up and could exercise.

I’ve actually been very fortunate (lucky is a better word maybe). I didn’t follow that advice and I held for years...just started exercising them seriously over the last 3 or 4 years during stock highs. That decision has advanced my RE timeline by many years.

I do have some exposure if I wait, but it’s not a huge percent relative to my investable assets. Would suck to lose a lot of it either way. If I pull the plug and take this offer, I’ll have a few months to exercise, so similar to the situation that bit you. I’ll probably cash them on the sooner end of the window as you advised.

 

[green night]

I’ve actually been very fortunate (lucky is a better word maybe). I didn’t follow that advice and I held for years...just started exercising them seriously over the last 3 or 4 years during stock highs. That decision has advanced my RE timeline by many years.

I do have some exposure if I wait, but it’s not a huge percent relative to my investable assets. Would suck to lose a lot of it either way. If I pull the plug and take this offer, I’ll have a few months to exercise, so similar to the situation that bit you. I’ll probably cash them on the sooner end of the window as you advised.

My advice, take the offer. Just went to a “celebration of life “. Friend died at 66. Retired at 64 in great health. A few months later, diagnosed with a rare cancer. He said to his wife “why didn’t I retire earlier?” They had plenty of money but they kept thinking, how nice a little more would be.

You never know, go do the things you’ve dreamed of.

 

[hopeisnotaplan]

I’ve decided to take the deal. Full salary and healthcare until Feb ‘19. As expected on this forum, there was mostly a “go” sentiment. All of which made sense to me. Too much risk in staying and losing the deal especially with a planned exit in less than 2 years anyway. Thanks for all the responses.

 

[pb4uski]

Congratulations. Good decision.

 

[Spanky]

I’ve decided to take the deal. Full salary and healthcare until Feb ‘19. As expected on this forum, there was mostly a “go” sentiment. All of which made sense to me. Too much risk in staying and losing the deal especially with a planned exit in less than 2 years anyway. Thanks for all the responses.

Good for you.

 

[travelover]

I think that you did the right thing. There is a whole new life out here.

 

[Scuba]

Congratulations! Great decision. I don’t think you’ll regret it.

 

[kgtest]

traded some time for money. You are free to move about the cabin. Good luck with transition!