One of the time-honored traditions in Corporate America is the buyout. Cutting labor costs is one way to keep Wall Street analysts onboard when profitability drops or growth slows and depending on how much you like your job, a buyout offer can be enticing. Once you move beyond fond thoughts of clocking out one last time, there are several practical questions you should consider.


The first thing you’ll need to understand is what the company is offering. A few common items included in packages are a continuation of salary for a specified time, vesting of retirement contributions and equity grants and potentially a continuation of some benefits (most commonly healthcare). If you’re close to retirement, determine whether accepting the offer will carry you to retirement. If you’re earlier in your career, you’ll need to understand how long the benefits will cover your needs before you have to find another job.

If you’re considering rejecting the buyout, is it possible you’ll be laid off in the next few years or offered another package? If so, it can be useful to understand what those scenarios might look like versus the package on offer. For example, if what is being offered – including salary and value of equity – equals two years worth of salary, but there is a good chance you’ll be laid off in a year, accepting the offer can be the best financial option. Similarly, if your firm has offered buyouts in the past that have gotten progressively less lucrative, it can make sense to make a move now.

Two other near-term factors to take into account are taxes and benefits. Accepting the package will impact your tax liability if only because your salary will change. Vesting or exercise of equity compensation can have a more significant impact on taxes as can receipt of deferred compensation. In both cases, the associated tax liability can be substantial, so make sure you understand both your potential liability as well as any options you might have for decreasing the tax you will owe.

When it comes to benefits, healthcare is typically the biggest concern. If you plan on moving on to another job or Medicare in the near term, COBRA coverage can provide a bridge. Longer-term, other potential options can include spousal coverage or an ACA-compliant policy, though the market for the latter is, unfortunately, deteriorating. You’ll also want to take a look at any life insurance you might have through your employer to make sure it is portable at a reasonable price.

The last thing to consider is the long-term impact on your plan. Will accepting the buyout disrupt your long-term savings or cause you to change your planned retirement date? If you’re in the fortunate position of being offered a buyout and having a job offer elsewhere, make sure you understand how the retirement plans compare (see this recent post on comparing job benefits). Regardless of the particulars of your situation, you’ll want to confirm that taking the buyout will still allow you to remain on track to meet your financial goals.