ArcaMax

Recently, two big companies asked swaths of their employees to raise their hands and walk out the door. Microsoft and Skydance (the parent of CBS News, where I am a contributor) offered voluntary buyouts to thin their ranks. For employers, these offers can nudge marginally attached employees to step away, perhaps in advance of broader layoffs.

If you are offered a buyout, how do you decide whether to jump ship? For someone planning to retire in a couple of years, a buyout can be a gift. For mid-career workers with a mortgage, kids in school and few prospects, it can be a trap. The decision requires an honest appraisal of your financial and emotional situation.

Here are some questions to consider:

If yes, then no matter how good the offer is, you may want to stay put. If you are unhappy, ask yourself whether it is the job itself, which may be a sign of burnout; the company, which has changed direction; or the industry as a whole. If your industry is consolidating, it can be appealing to take a buyout before the inevitable round of layoffs hits. Layoff packages are usually less generous than those offered through voluntary buyouts.

If you haven’t done so, determine how much you spend monthly, then see how long the buyout or severance will last. Presume it will take six months to land a new job — a little longer if you are older, a little shorter if you are younger. If you have an emergency reserve fund, you may need to tap it. Remember, that’s what it’s there for: This is your rainy day! Also, check with your state’s unemployment office to see whether taking a voluntary buyout could disqualify you from collecting benefits.

Some buyouts include subsidized coverage, but many do not. In two-income households, you may be able to hop onto your spouse’s plan. Everyone else has two main options: extending your existing coverage to 18 months via COBRA or opting for coverage through the Affordable Care Act marketplace. Either will likely mean higher costs until you land another employer’s plan or Medicare.

Buyouts are often juiciest for long-tenured employees. But many in their 50s worry that they can’t tap their retirement accounts until 59½. Enter, the “Rule of 55,” which states if you turn 55 or older during the calendar year you lose or leave your job, you can take distributions from that employer’s 401(k) without the 10 percent early withdrawal penalty. (You still owe taxes on withdrawals from a traditional account.) The rule does not apply to IRAs, so don’t be so quick to roll the 401(k) over.

Unvested stock and restricted stock units, an upcoming bonus, a pension that’s about to bump up with another year of service, or an unvested 401(k) match could all be forfeited. Some of these may be negotiable, so ask.

If you decide to take a buyout, a couple of recommendations:

A lump-sum payment is taxed as ordinary income, and the amount withheld may not cover your full bill, so set some cash aside to pay Uncle Sam and your state next April. If your separation straddles year-end, ask whether part of the payment can be pushed into January to spread out the tax burden.

Have an attorney review the agreement, especially any non-compete or release language, and run the numbers with a fee-only financial planner. Buyout windows can be short, so get these appointments on the calendar now.

_____

_____

========

(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.)

©2026 Tribune Content Agency, LLC