by A. Scott White, CFP®, ChFC, CLU
President, Scott White Advisors
In today’s economy, it’s become quite common for organizations to offer early retirement or severance packages to reduce their payroll. No matter how greatly valued you are or how long your service, companies need to do what is best for their survival. And you do too. Like many other financial decisions, you can (and should) negotiate for the best package to meet your individual needs.
Before beginning any discussions with your employer, you need to do your homework. The first place to start is with you. You’ll want a clear understanding of your current financial needs and attempt to anticipate what you will need in the future. Specifically, you’ll want to evaluate the following factors:
- Health insurance/medical coverage
- Severance type (lump sums or payments)
- Pension consequences
- Financial planning assistance
- Educational assistance
- Life and/or disability insurance
Health insurance is one of the most important elements to evaluate because as we age, we generally require more medical care. You’ll want to obtain the best and most comprehensive coverage possible until you can get Medicare (at age 65). You’ll want to look at premiums and whether you anticipate them increasing quickly. Some companies are willing to share costs simply to keep transitions smooth. It doesn’t help the company to have employees see departing colleagues treated poorly.
If your employer doesn’t offer health insurance, the COBRA law lets you continue coverage with your current employer for up to 18 months. Unfortunately, it’s at your own expense and is quite expensive. It is, however, a viable option until you find an alternative. If you do end up with no coverage until 65, you will need to budget accordingly. If you’re married, you may be able to join your spouse’s company sponsored plan.
In general, always ask for more than you need and negotiate from that point, but be realistic. As with most negotiations involving money, it’s unlikely you’ll get everything you want. Below are four steps to ensure you’re prepared to negotiate effectively:
- Maintain an ongoing list of your work accomplishments. You’ll feel more confident in your negotiations and you’ll be ready to justify your demands.
- Prepare for the worst to keep your cool. By paying attention to the economic trends and your own company, you can anticipate an offer and keep your calm when it arrives. Staying calm has two benefits: you won’t react impulsively and you’ll be calm during negotiations.
- Know what’s been offered to others. Talk with your former colleagues about their packages. While you might not get the same offer, it does provide some leverage on what the company can realistically provide.
- Understand your benefits, especially regarding health insurance and medical coverage. Your human resources department can provide a Summary Plan Description and other information that could be useful.
After you’ve done all your homework, you’ll want to write a list of your demands. The more clear your demands, the better your negotiating will go. Whatever you get during your negotiations, make sure it’s in writing, especially regarding continued health benefits. Consulting with a Certified Financial Planner® throughout this process can help you evaluate each aspect of your retirement package and create a plan of attack that will ensure your retirement starts with a solid foundation.
Scott White is past president of the Financial Planning Association Southwest Florida Chapter. He is past president of the Southwest Florida Chapter of the American Society of Financial Service Professionals, past president of the Lee County Estate Planning Council, and founding president of the Planned Giving Council of Lee County. For more information, visit www.http://scottwhiteadvisors.com/ or call (239) 936-6300. Scott White Advisors is an independent Registered Investment Advisor and is located at 1510 Royal Palm Square Boulevard, Fort Myers, Florida 33919. Securities offered through Raymond James Financial Services, Inc., member, FINRA/SIPC.