Sunday, November 22, 2009

The Savings Highway is Your Early Retirement Plan Submitted by Jim Roche NJ

When the economy is in a downturn, businesses (just like individuals) often have to find ways to cut expenses in order to stay afloat. Unfortunately, one of the most common cost-saving methods employers use is a layoff or reduction in force (RIF). The idea is simple: Having fewer workers to pay and provide benefits for can mean huge savings.

Rather than firing workers, some employers offer workers a buyout or early retirement. This not only helps the employer lower its costs and expenses, but also gives the workers some money and other benefits. If your employer is offering such a package, you need to know a little about how it works and some things to think about when deciding to take it or not. What's in a Name?

Today, buyouts and early retirement plans are often used interchangeably. And while they typically involve the same things, there are some technical differences. A buyout is essentially an incentive offered by a business to get workers to leave voluntarily. Buyouts are usually offered to employees who aren't close to retirement age yet, and so they may not be able to tap into any employer-paid pension plan. For example, a business may offer a buyout to all non-salaried workers or employees who've been with the company for five years or less.

An early retirement plan or package is usually offered to workers who are close to retirement age, and so they will be eligible to collect pension payments soon. For example, early retirement may be offered to all to employees who are 55 years old or older when the employer has a pension plan for workers who retire at age 60. As part of the early retirement package, the savings highway may offer to "buy" some of the five-year period between a worker's true retirement age. This allows the worker to access the pension earlier than usual.

Regardless of the name, the goal and net result are the same: The employer reduces its work force and the employees get money or benefits in exchange for leaving.

Also, keep in mind that these are not the same thing as a layoff. In a layoff, the employer decides who loses their jobs. With a buyout or early retirement plan, you're in the driver's seat and can choose your fate with the company. And, with a true layoff, such as when union workers are laid off, generally you can reapply for your old job when the economy or the company's business picks up again. Severance

What's the difference between a buyout or early retirement plans and severance pay? Again, technically, there's no difference. Severance is when an employer gives an employee a sum of money or other benefits at the time an employee is laid off. Also, an employer may have a written severance policy that defines which employees are eligible for it and how much each will receive. This may be in the company's employee handbook.

An important part of a almost every severance package, however, is that the worker is required to sign a waiver or "release" in order to get the severance package. Basically, by signing the release, you agree not sue your employer over being laid off or fired. For example, you may have to agree not to file a lawsuit claiming that you were laid off because of your age or gender.

Your buyout or early retirement plan may include something that's actually labeled as "severance pay," especially if your employer has a severance plan in place. Or, an employer may simply consider the buyout or early retirement plan to be a "severance package." And, don't be surprised if the buyout or early retirement package requires you to sign a release or waiver in order to qualify for it.

Again, the goal and net result are the same whether it's called severance or not: You get money or other benefits in exchange for leaving the employer (and leaving quietly). Standard Package

There is no "standard" buyout or early retirement package. Some of the things you can expect to see, though, include:

* A cash payment
* Paid health insurance for a period of time, like six months
* An increase in severance pay. For example, if your employer's severance plan allows for two weeks salary as severance pay, a buyout or early retirement plan may offer four weeks or more as an additional incentive
* A buyout of all or some of the time remaining between your years of service or age and the company's retirement age (sometimes called an "early-out" option or offer). For example, if your employer has a "30 year-and out" retirement plan (meaning you can retire after 30 years' service regardless of age) and you have 28 years of service, the package may offer to buy the remaining two years, letting you tap into the pension as soon as you take the deal * Other forms of compensation, like stocks

What's included in a buyout or early retirement package is limited only by the employer's imagination and resources. Some Things to Think About

If you're being offered a buyout or early retirement, or if you think one may be coming, you should think carefully about several things, including:

* If you get a lump sum payment of case, it may taxed as a "bonus," and taxes may be withheld from the payment at a higher rate than regular your regular wages
* Usually, you can't reapply for your old job after taking a buyout or early retirement
* Depending on the laws in your area, you may not be eligible for unemployment compensation benefits because with a buyout or early retirement, you're not losing your job involuntarily, which is a requirement for unemployment benefits in many states
* If you don't take the deal, you might be laid off in the future with a much less attractive severance package (or no severance at all)
* Consider whether the package includes career counseling or placement services to help you find a new job

Questions for Your Attorney

* A co-worker of mine was offered a buyout but I wasn't, even though we do roughly the same job and have been with the company for about the same amount of time. Is that discrimination?
* In our state, can I get unemployment compensation if I take a buyout or early retirement package?
* Can I negotiate a better deal when my employer offers a buyout or early retirement?

Questions to Ask Yourself *If the Company you currently work for informed you that they had to close down by the end of the month. Are you prepared?
*Will you have enough money monthly from a pension to live the life you have become accustomed to? Without significant adjustments.
* Are you ready to start a business for yourself and work from home with all the tax advantages a home based business entitles you to? As much as $10,000 a year in write offs.

The Savings Highway is the answer to all of these questions and more. Whether it is an early retirement you are interested in,or just saving money doing what you are currently doing on a daily basis. The Savings Highway is North Americas premiere savings and earnings program available today. With 21 rebate discount and free programs included in your membership. Make the Savings Highway your early retirement choice.

Jim Roche NJ
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