Should You Accept an Early Retirement Offer?

Here’s what to consider if your employer approaches you with a buyout offer

By Matt Smith


We all want to retire on our own terms, but sometimes our employer has other ideas. While you can’t be let go simply because you’re about to turn 65, if you’re over 55 or have worked at your company for a decade or more (or both)—your employer may offer a buyout, or early retirement package. While retirement may be not have been in your plans, there are a few things to consider before rejecting such an offer.

Buyouts differ from severance pay. While severance pay serves as compensation for being let go, a buyout offer lets you make that decision for yourself. But if you’re approached with an early retirement package, take it as an indication that your time at the company may be limited. Even if you refuse the offer, you may still find yourself driven out by management shortly after, possibly with much less compensation. Once you’ve been made an offer, depending on your position in the company, you may have some freedom to negotiate the terms of your buyout package.

Consider the alternatives—if you don’t take the buyout offer now, will you still be eligible for a package later? A buyout offer may end up being much more generous; for example, it may include extended health benefits for which you wouldn’t be eligible otherwise.

The main question you’ll want to ask yourself is where your income will come from. Ask your employer for a projection of your pension income in the event that you accept the offer. This may look quite different depending on the type of pension plan you have. You may receive a portion of the money saved in your employer’s pension fund upon accepting a buyout.

If retirement is on the horizon anyway, a buyout package may be just what you need to ease your way out of the workforce. While the funds can act as a buffer, allowing you the time to search for another full-time job, the buyout could also give you the freedom to move to part-time or contract work. It could be just the leg-up you need to start that freelance business you’ve been dreaming of.

Photo: iStock/Wavebreakmedia.