Buyouts and Early Outs: Questions You Need to Ask
By John Grobe
Thursday, January 10, 2008
Now that the fiscal year 2008 budget has been approved and the dust from the annual game of chicken has settled, we have some agencies who came out ahead and some who came out worse off than before in the money game. Agencies who ended up with less money are looking for ways to reduce their costs. This often includes offering early outs and/or buyouts. This does not mean that buyouts are "coming soon to an agency near you." However, if they do, are you prepared to make a good decision?
Early outs and buyouts (VERAs and VSIPs to acronym fans) are normally offered for a limited period of time. The normal "window" of choice is open for only one to two months.
So, what should the average federal employee consider when looking at a potential buyout or early out? Obviously, the first thing is eligibility. If you have 20 years of service and are at least 50 years old, you are eligible. If you have 25 years of service, it does not matter how old you are – you are eligible.
Several other questions need to be asked as well.
- Can I afford to live on the amount I will get as an early out pension?
- How much in future pension benefits will I be giving up if I take an early out?
- If I cannot afford to live on my pension, what can I do to supplement my pension income?
- Do I have the skills needed to do whatever it is I need to do to bring in the extra income?
- Are there actual opportunities in my area where I can make enough money using the skills I now have?
- Is there any likelihood that I will return to government service within five years of accepting a buyout?
Too many people who accept an early out or buyout offer are focused on the fact that they don't like where they are now. This is especially true if they don't begin thinking about their choice until the window period is nearly over. They focus on the from part of the transition they will be making. Adequate time must be given to considering the to part of the equation.
You should begin to think of whether you want to take an early out or buyout long before it is offered. This will allow you to consider all of the pros and cons without feeling the pressure of having to make a decision before the offer of buyout or early out is withdrawn. With buyouts and early outs, as with other decisions we make in life, the more prepared we are and the more information we have – the better decision we will make.
© 2008 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.
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