As many businesses are looking to reduce the size of their workforce due to the current economical downturn, employees are asking the question, “Exactly what is an early retirement package”?
An early retirement package is usually offered to employees who are close to the company’s normal retirement age. In most situations you will have access to your pension plan a few years earlier than anticipated. The early retirement package may include monthly payments or a lump sum payment and/or benefits. Payments offered as part of an early retirement package may be called severance pay even though this term also applies to people who are laid off.
You are not obligated to accept an early retirement package, but there are a few things that you should consider before making the final decision. If you accept the package, you will not be able to reapply for your old position should it become available in the future. A lump sum payment may be taxed as a bonus or may put you in a higher tax bracket for the year, and you should consider the stability of the company. If the company is in financial disarray, you may be laid off at some point in the future without any severance or benefits.
To understanding the fine print of any early retirement package offer, you should contact an attorney to review the documents and explain any details that seem confusing. After putting in 25 to 30 years at a company, your retirement decision should not be taken lightly.