Life events · Buyout / early-retirement offer

Offered a buyout? A financial checklist.

Don't sign the day you get it. Run the math first. Educational only — not financial advice.

A buyout or early-retirement package is a real decision with a deadline, but rarely a same-day one. The offer bundles severance, benefits, and timing in ways that have big tax and healthcare consequences. Here's how to evaluate whether to take it — and how to handle it if you do.

Decode the offer

1. Severance. How many weeks/months, paid as a lump sum or salary continuation? A lump sum is taxed in one year (possibly pushing you into a higher bracket); continuation spreads it.
2. Benefits bridge. Does it include paid COBRA for a period or extended coverage? Health insurance is often the biggest hidden value (or hidden gap).
3. Retirement and equity. What happens to unvested 401(k) match, pension accrual, and any stock/options? Sometimes vesting accelerates; sometimes you forfeit.
4. The release. You're usually signing away the right to sue. That's normal — but it's why you don't sign blind.

The healthcare gap is make-or-break

• Under 65, you're not yet Medicare-eligible. Compare COBRA (your plan, full price) vs a marketplace plan (a job loss is a qualifying event; subsidies are income-based and your income may drop).
• Age 63–64, bridging to 65 is a known, finite cost — price it precisely. This single number often decides whether the buyout works.

The retirement-access angle (if you're 55+)

• The "rule of 55." If you leave your job in or after the year you turn 55, you can generally withdraw from that employer's 401(k) without the 10% early-withdrawal penalty (income tax still applies). Rolling it to an IRA first loses this benefit — so don't roll over reflexively.
• Social Security timing. Claiming before full retirement age permanently reduces the benefit. A buyout doesn't force you to claim early — bridge with other money if you can.
• Pension election. Lump sum vs lifetime annuity is a major, often irreversible choice. Model both.

Should you take it? The math

Lay the offer's total value (severance + benefits bridge + accelerated vesting) against your runway and your next move. A buyout is attractive if it covers the gap to your next job, to 65 (Medicare), or to a realistic retirement. It's a trap if you take the cash, underestimate the healthcare gap, and have no plan for the income.

What not to do

• Don't sign on the spot. Use the review window.
• Don't roll the 401(k) to an IRA before using the rule of 55 if you're 55+ and may need penalty-free access.
• Don't claim Social Security early just because you stopped working — bridge with other funds if you can.
• Don't underprice the health-insurance bridge. It's usually the biggest variable.

When to get a human

This is a high-stakes, often-irreversible decision — a fee-only fiduciary is well worth the hour:

• There's a pension lump-sum-vs-annuity election.
• You're weighing early retirement vs another job.
• You want the severance structured across tax years, or a clear bridge-to-Medicare plan.

Find a fee-only advisor →

Park the severance while you decide

Severance cash should earn something safe while you plan your next move — the same vehicles that work for a job-loss runway.

Compare savings vs T-bills after tax →

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This page is educational only and does not constitute personalized financial, tax, or legal advice. Severance terms, the rule of 55, pension elections, and healthcare options are highly situation-specific. Talk to a licensed professional before making final decisions.