Wednesday, March 04, 2009

Is it OK to take a corporate buyout of early retirement?


Emily Brandon has an important article from US News and World Report, March 4, 2009, reproduced on Yahoo! Finance “Ten Tips to Evaluate Early Retirement Offers,” link here. I could not find it yet at US News.

It is certainly true that companies “buy out” highly compensated employees and often do not pay enough to justify leaving. The practice started with the LBO’s and hostile takeovers of the 1980s, but today, with the dire economic crisis and bankruptcies, some companies are not in a position to do anything but fire (even without much severance). Companies are faced with longer pension payouts because of early retirements and longer lifespans, and additional pension plans could wind up being picked up by the PBGC.

Brandon makes the important point that starting social security benefits will reduce your monthly benefit lifetime by an actuarial formula, which over time has become less favorable because of longer lifespans.

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