Voluntary Separation Package Advice

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stickman731
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Voluntary Separation Package Advice

Post by stickman731 » Sat Feb 15, 2014 10:36 am

I was recently offered a Voluntary Separation Package by my company (~$200,000 lump sum pre tax) plus stock options maturity (~$50,000). They will not contest me seeking unemployment benefits as this is part of a larger corporate restructing. Health benefits at their rate for 6 month then COBRA.

I am really laboring over if I should accept the VSP. The Boglehead community has offered good advice and recommendations over the years. I learned a lot but still need guidance. I have worked for 29 years (loved what I did for 27 years prior to being acquired two years ago). The current organization is dysfunctional due to poor integration of acquired companies and has a complete disregard for money, customers and its people (although they do not think it). Antiquate systems (still using Lotus Notes) and complex linear procedures (everything sequential - no out-of-box initiative).

Emergency funds: $60,000 in Savings Account

Pension: None (only 401K and taxable savings)

Social Security – 66 and 8 month = $2,643/month, 70 = $3,389/month or 62 - $1,838/month (SSA.gov says these will be my benefit if I continue to earn greater than $101,000/yr – so I really do not know the real value).

Debt: None (house paid-off thanks to Boglehead advice!)

Tax Filing Status: Single
Tax Rate: 28% Federal, 6.7% State

State of Residence: NJ

Age: 55 (56 in July) 

Desired Asset allocation: 70% stocks / 30% bonds

Desired International allocation: 15% of stocks




Current retirement assets



Taxable - $120,000


8.0% Columbia Real Estate Investment (CREEX) (1.05) 

38.0% Honeywell (HON)- Dividend Re-Investment Plan
5.9% Kimberly-Clark (KMB) - Dividend Re-investment Plan
20.3% New Jersey Resources (NJR) 
- Dividend Re-Investment Plan
27.8% Various – Vanguard Brokerage



401k - $1,000,000

31.6% Vanguard Inst Index (VINIX) (0.04)
27.7% Vanguard Total Bond Market Inst (VBTIX) (0.07)
15.4% Vanguard Ext Mark Ind Ins (VIETX) (0.12)
15.2% Vanguard Small Cap Index Inst (VSCIX) (0.08)
10.1% Vanguard Dev Markets Index (VDMIX) (0.20)




Roth IRA at Vanguard - $52,000

100% Vanguard Total Bond Market Index (VBTLX) (0.10)

My thoughts are to roll over my 401K into similar IRA investments.


The big question is can I survive without a job? Reviewing my Quicken spends – I spend between $40,000 – 50,000 / year over the last three years (which includes some work related expenses (gas, lunch, clothing). I will need health insurance which looks around $600-800/month in NJ.

Should I get another job (may be part-time or consult)? Probably yes because I would be bored – type A personality.

How can I be more tax and savings efficient?

Your advice is always appreciated.

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VictoriaF
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Re: Voluntary Separation Package Advice

Post by VictoriaF » Sat Feb 15, 2014 10:50 am

I recommend taking the package.

You can calculate your Social Security benefit as if you stopped working now. Here is an online calculator. In general, waiting to collect Social Security is much more advantageous than working extra years. You don't need to live in New Jersey upon taking the package, you can move to a state without State Income tax, e.g., Florida, or even live abroad for a while.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

freebeer
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Re: Voluntary Separation Package Advice

Post by freebeer » Sat Feb 15, 2014 10:57 am

Yes you can survive (u may need to annuitize at some future point to supplement SS)

Re: whether you should accept... What is your current salary? What is chance next reduction may be involuntary and at lower payout?

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Watty
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Re: Voluntary Separation Package Advice

Post by Watty » Sat Feb 15, 2014 11:12 am

I was recently offered a Voluntary Separation Package by my company (~$200,000 lump sum pre tax) plus stock options maturity (~$50,000).
......
The current organization is dysfunctional due to poor integration of acquired companies and has a complete disregard for money, customers and its people (although they do not think it). Antiquate systems (still using Lotus Notes) and complex linear procedures (everything sequential - no out-of-box initiative).
How does that compare to what you are getting paid and do you have a good contract or belong to a union?

If you have a traditional pension or promised retirement benefits that could be part of the calculations too.

If your pay is $125K that is two years income so not taking the severance money is in effect offering to work for free, except for benefits, for maybe two years(depending on your income) and hoping that things get better which sounds like wishful thinking based on the description of your company.

The way that I have seen this work out several times is;

1) First wave: generous voluntary buy out packages.

2) Second wave: involuntary layoffs with modest severance packages.

3) Third wave: two weeks pay in lieu of notice and a security guard escorts you to the door.

This is not an exaggeration and with each wave of people leaving the people that were left behind were swamped with the additional work that the people that are gone used to do.

Unless you have a very high income or a very good contract then take the money and run.

The fact that they have offered you a severance package like that means that you are considered expendable and will likely be the first to go if there are future layoffs that will likely not have nearly as good a severance package.
Last edited by Watty on Sat Feb 15, 2014 11:16 am, edited 1 time in total.

YttriumNitrate
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Re: Voluntary Separation Package Advice

Post by YttriumNitrate » Sat Feb 15, 2014 11:14 am

Based on your assets and spending rate, it seems like you have too much money to be working at a job you don't like.

yosh99
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Re: Voluntary Separation Package Advice

Post by yosh99 » Sat Feb 15, 2014 11:22 am

It looks to me like you are in the very fortunate position of being offered an opportunity to spend the rest of your life doing something more rewarding and fulfilling than suffering in a job with dying prospects. You are also lucky that you can now purchase health insurance without the problem of pre-existing conditions. That used to be one of the horrors of early termination. It's a generous offer, and I'd take it.

awval999
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Re: Voluntary Separation Package Advice

Post by awval999 » Sat Feb 15, 2014 11:27 am

I would take it. It's only "voluntary" this time. Next time it won't be. Like others have said, they wouldn't be asking you to separate if you were irreplaceable.

RadAudit
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Re: Voluntary Separation Package Advice

Post by RadAudit » Sat Feb 15, 2014 11:51 am

In reductions in force, the first offer is often times the best offer.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

cherijoh
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Re: Voluntary Separation Package Advice

Post by cherijoh » Sat Feb 15, 2014 12:07 pm

stickman731 wrote:I was recently offered a Voluntary Separation Package by my company (~$200,000 lump sum pre tax) plus stock options maturity (~$50,000). They will not contest me seeking unemployment benefits as this is part of a larger corporate restructing. Health benefits at their rate for 6 month then COBRA.

I am really laboring over if I should accept the VSP. The Boglehead community has offered good advice and recommendations over the years. I learned a lot but still need guidance. I have worked for 29 years (loved what I did for 27 years prior to being acquired two years ago). The current organization is dysfunctional due to poor integration of acquired companies and has a complete disregard for money, customers and its people (although they do not think it). Antiquate systems (still using Lotus Notes) and complex linear procedures (everything sequential - no out-of-box initiative).
I took a VSP at 46 - the company was relocating headquarters to an area in which I didn't want to live and to a company site managed by someone who had fired more than one competent co-worker who dared to disagree with her and was known to berate employees in public settings. No way was I moving into that toxic environment! I obviously had to retool, since I wasn't at a point to retire. I went back for a Masters and after some bumps in the road have found a job I like. It doesn't pay as well as the old job, but I also don't have the stresses I would have had I stayed. FYI - quite a few of my former coworkers who did accept the transfer only lasted a year or two anyway.

I suggest getting out while the getting is good. If you can find any kind of job that you enjoy (even if not in the same field), you will make your retirement nest egg stretch and give you an extra cushion. And seriously consider volunteering if you are afraid of being bored. Plus it is a great way to network and may lead to options for future employment.


See suggestions in blue below:
stickman731 wrote: Current retirement assets

Taxable - $120,000
8.0% Columbia Real Estate Investment (CREEX) (1.05) - REITs are better in tax deferred accounts; Expense Ratio is very high - Sell and purchase Vangaurd REIT in rollover IRA

You have way too much in individual stocks by Boglehead standards; stop reinvesting dividends and add to emergency fund or use for expenses;
In years after receiving lump sum sell down individual stocks and take advantage of 0% cap gains through 15% marginal tax bracket

38.0% Honeywell (HON)- Dividend Re-Investment Plan
5.9% Kimberly-Clark (KMB) - Dividend Re-investment Plan
20.3% New Jersey Resources (NJR) - Dividend Re-Investment Plan
27.8% Various – Vanguard Brokerage

401k - $1,000,000 You are overweighting small cap funds by a huge margin:
VINIX is S&P 500; total stock market index = 80% VINIX + 20% VIETX ; Suggest Total international Index instead of VDMIX)

31.6% Vanguard Inst Index (VINIX) (0.04)
27.7% Vanguard Total Bond Market Inst (VBTIX) (0.07)
15.4% Vanguard Ext Mark Ind Ins (VIETX) (0.12)
15.2% Vanguard Small Cap Index Inst (VSCIX) (0.08)
10.1% Vanguard Dev Markets Index (VDMIX) (0.20)

Roth IRA at Vanguard - $52,000 You should have stock funds in Roth IRA and Bonds in Traditional IRA since stocks have higher expected return
Also consider doing some Roth Conversions from Rollover IRA in years of low income

100% Vanguard Total Bond Market Index (VBTLX) (0.10)
Good luck!

Jack FFR1846
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Re: Voluntary Separation Package Advice

Post by Jack FFR1846 » Sat Feb 15, 2014 12:08 pm

The only cases I have seen where you would not take this package is if the money is much less (like a month salary only) and you have a clear wrongful termination case and a lawyer ready to go as soon as they instead terminate you for cause.

With the description you give, I would take that absolutely as soon as possible. Just consider.....if you refuse and are let go in a week with zero, what are you going to do.
Bogle: Smart Beta is stupid

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jimb_fromATL
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Re: Voluntary Separation Package Advice

Post by jimb_fromATL » Sat Feb 15, 2014 12:12 pm

stickman731 wrote:
Debt: None (house paid-off thanks to Boglehead advice!)

Tax Filing Status: Single
Tax Rate: 28% Federal, 6.7% State


Age: 55 (56 in July) 

The big question is can I survive without a job? Reviewing my Quicken spends – I spend between $40,000 – 50,000 / year over the last three years (which includes some work related expenses (gas, lunch, clothing). I will need health insurance which looks around $600-800/month in NJ.
Just curious, but with a paid for home and company health insurance (up 'til now) how does a single person spend $40-$50K per year?

Seems like there might be some room to cut back on living expenses ... even in NJ.

As for whether to take the early out package, my observations and experiences from corporate downsizing in the past have been that a lot of people who didn't take the initial offering for an early out ended up being fired without nearly as good a parachute within the next couple of years anyway.

And the people who stayed and got to keep their jobs had to pick up the work load from the people who left ... but without any extra pay for doing it.

jimb

Draak
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Re: Voluntary Separation Package Advice

Post by Draak » Sat Feb 15, 2014 12:19 pm

delete
Last edited by Draak on Sun Mar 16, 2014 2:37 am, edited 2 times in total.

btenny
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Re: Voluntary Separation Package Advice

Post by btenny » Sat Feb 15, 2014 12:42 pm

Is there some sort of pension offering available to you after say 30 years or some other good benefit that vests soon? If not run run away ASAP and take the offer. On the surface the deal seems pretty good. The only risk I see is you getting medical insurance and Obamacare makes that a done deal.

I took a similar deal that was offered to all senior people at my company way back when at age 53. It was one of the best decisions of my life. I did not go back to work in industry. But like you I was a type A so I studied and worked out and took a play sports job as a ski teacher. I did that for 5 winters (worked about 5.5 months) and had a blast. Since then I have met lots of people who do similar things. Some retired early and now are "golf guys" and others are "fishing guys" and others are "ski guys" like me. Oh and then there are "baseball guys" as well. The fishing guys act as guides or run fishing charters and the golf guys work as caddies or golf hosts or starters or marshals, etc. And ski guys work as coaches or lift operators or medics, etc... The baseball buys work as ushers or grounds guys or helpers.

Basically all of us have fun jobs that pay us to "play" and we do stuff that we love. And by working at a play job you get tons of free stuff and free fees so you don't spend any money for play time or accessories. Plus in my case I became a much better skier because my "work" included free ski lessons from better guys 2-3 days a week. My golf friends get similar bennies. All of us get 40-60% discounts on equipment and other stuff as well.

Oh and did I mention my retired fireman neighbor who went to the Bahamas to play for 2 weeks and ended up staying for 5 months and then moved there. He helps run a fishing and diving company along with his new girl friend...

Life is too short. Go for it and have fun....

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stickman731
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Re: Voluntary Separation Package Advice

Post by stickman731 » Sat Feb 15, 2014 12:47 pm

jimb_fromATL wrote:
stickman731 wrote:
Debt: None (house paid-off thanks to Boglehead advice!)




Just curious, but with a paid for home and company health insurance (up 'til now) how does a single person spend $40-$50K per year?

Seems like there might be some room to cut back on living expenses ... even in NJ.he people who left ... but without any extra pay for doing it.

jimb

Taxes and insurance (home, auto and umbrella) = $12,000/yr and 2-3 vacations

DualIncomeNoDebt
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Re: Voluntary Separation Package Advice

Post by DualIncomeNoDebt » Sat Feb 15, 2014 12:51 pm

Accept the package. Accept the package. Accept the package.

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rob
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Re: Voluntary Separation Package Advice

Post by rob » Sat Feb 15, 2014 1:04 pm

Add me to the take it and run list....... Just be sure everything is in writing e.t.c.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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frugaltype
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Re: Voluntary Separation Package Advice

Post by frugaltype » Sat Feb 15, 2014 1:19 pm

Take the money and run.

You can always look for another job. Even if you don't find one, you should be in quite reasonable shape.

There is no guarantee that if you don't accept this offer, any future offer will match it. In my experience from the dot com collapse, you're just about guaranteed future offers will be less.

I would roll the 401K out into an account you control as well.

Near the end of future years, make a pass through your expected income tax and see how low your taxes will be, esp. if you don;'t take a new job. You might find yourself in a situation where you can convert some traditional IRA money to a Roth with little tax penalty.

placeholder
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Re: Voluntary Separation Package Advice

Post by placeholder » Sat Feb 15, 2014 1:34 pm

If you're pretty sure you could get consulting or parttime work it would be a no-brainer to me as that's a really good base to go from especially with unemployment payments while you look.

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rpike
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Re: Voluntary Separation Package Advice

Post by rpike » Sat Feb 15, 2014 6:47 pm

You may not qualify for unemployment if you take the package - at least not right away. Severance is normally disqualifying for UI meaning that you do not become eligible for UI until your severance ends. A lump sum will just be treated as n weeks salary equivalent for calculating the length of disqualification.

However in my experience there were some things that can made my severance non-disqualifying. In order to receive it, I had to sign a waiver giving up any right to sue them. This is pretty standard these days and, at least in my state, this overrode the disqualification for UI.

Another Rick

dgdevil
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Re: Voluntary Separation Package Advice

Post by dgdevil » Sat Feb 15, 2014 7:08 pm

I took a union-brokered package after being fired. It wasn't as generous as yours and my finances aren't as strong. But life has never been better these past 2 years. My old comrades still in the trenches are miserable.

Only recommendation: My old company, to their credit, agreed to my request to split the lump-sum payment between tax years to reduce my tax bill.

Yes, both sides will have to sign a boilerplate severance deal relating to dispute resolution, non-disparagement, and return of company property. So stock up on batteries, stationery now!

PS -If you plan to leave New Jersey at some point, keep the 401(k) with your company and ask them to pay the fees. This gives you ERISA protection.

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Ged
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Re: Voluntary Separation Package Advice

Post by Ged » Sat Feb 15, 2014 7:21 pm

Absolutely do it.

While you are at it seriously consider getting out of NJ too.

BanditKing
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Re: Voluntary Separation Package Advice

Post by BanditKing » Sat Feb 15, 2014 7:48 pm

Like everyone else, my advice is to take it. If you don't, you'll likely be laid off in the next round with close to nothing.

You should be able to apply for for ACA/Obamacare if you aren't re-employed by the time your insurance runs out - no real reason to take an over-expensive COBRA any more. I think you do need to sign up 3 months before it goes active. You can call the ACA help line and they'll talk you through it.

You're going to have a high earned income for this year with that kind of severance, so doing whatever you might be able to to defer and lessen it would be a good thing. Make sure your 401k is filled now, set your salary deferral to as high as you can, or work with HR so your buyout fills it. Take any capital losses you might have for sure, especially if that stock package has gains in it.

It doesn't hurt to offer to stay on as a 1099 consultant at an appropriate hourly rate so your expertise can be transferred to those employees still there. They may say no, but you never know.

Depending on your circumstances, this is a good chance to pull up stakes and move to a more tax-advantaged part of the country (florida, arizona, alaska, etc), sell the house, live cheap. Figure out what you want to do and where you want to do it. If you are still unemployed come 2015, you'll have almost zero income any more, so now you can qualify for a lot of things like ACA subsidies, food stamps, etc. (hey, I've paid into those things all my life, I'd have no shame about taking advantage). You might find you can be pretty comfortable and happy living simple and cheap, especially if you can get your cost of living down.

I'll leave advice on your accounts to others, although the REIT in taxable jumps out as out of place. Is there really any reason to move your 401k? It's already with Vanguard funds so outside of maybe changing the balance, it might be ok to leave it where it is - at least for now? What kinds of additional fees if you leave it, and will the company even allow you to after one year? If you think you are going to extend this early retirement, or at least retirement for a while, you may want to back down from 70/30 to something a little more stable.

BanditKing
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Re: Voluntary Separation Package Advice

Post by BanditKing » Sat Feb 15, 2014 8:01 pm

Also, I'd be worried about qualifying for unemployment in this circumstances. Even if they don't contest it (get that in writing), there's a possibility that it could get denied. If you think you can, you may want to get some kind of language that put the company on the hook if the state rejects it for an appropriate duration (currently 63 weeks I think, unless congress re-authorizes the extension). From what I could find the maximum benefit for New Jersey is $600/week.

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Re: Voluntary Separation Package Advice

Post by KyleAAA » Sat Feb 15, 2014 8:11 pm

I know in my state, severance packages completely disqualify you from collecting unemployment. How many months worth of pay is the lump sum? In my state, that's how many months you'd be ineligible for benefits. You should first find out if you can even collect before making any plans.

Saving$
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Re: Voluntary Separation Package Advice

Post by Saving$ » Sat Feb 15, 2014 8:16 pm

stickman731 wrote:I am really laboring over if I should accept the VSP
YES you should. All reasons outlined here.
stickman731 wrote:The current organization is dysfunctional due to poor integration of acquired companies and has a complete disregard for money, customers and its people (although they do not think it). Antiquate systems (still using Lotus Notes) and complex linear procedures (everything sequential - no out-of-box initiative).
This is another reason you should take the VSP ASAP
stickman731 wrote:Pension: None (only 401K and taxable savings)
Another reason you have no reason to stay (as long as the Pension = none would not change if you stayed for 38 years service or something like that
Social Security – 66 and 8 month = $2,643/month, 70 = $3,389/month or 62 - $1,838/month (SSA.gov says these will be my benefit if I continue to earn greater than $101,000/yr – so I really do not know the real value).
Go to the calculator and enter $0 as last years income. It will be a bit low because SS will include last years income in the calculation, but the simple calculator assumes you will continue to earn what you earned last year. If you force a $0 for last year, you can get within about $20/month.
My thoughts are to roll over my 401K into similar IRA investments.
See the advice in cherijoe's post. It is spot on.

The big question is can I survive without a job?
Not sustaining your current spending level.

Reviewing my Quicken spends – I spend between $40,000 – 50,000 / year over the last three years (which includes some work related expenses (gas, lunch, clothing). I will need health insurance which looks around $600-800/month in NJ.
Does your $40k-$50k current spend include income taxes? That will decrease.
However, your other expenses are sure to increase, as yo lose subsidized health insurance and have unlimited free time to travel. If we average it at $45k, add $8k for health insurance and $5k because you will have more time to travel, you will need $58k/year. Sounds like ALOT for a single person. Firecalc indicates a $1.4 mil portfolio with a $58k spend rate over 40 years has a success rate of 78%. If you can cut your total expenses to $48k, you have a 99% success rate over 40 years.

Should I get another job (may be part-time or consult)? Probably yes because I would be bored – type A personality.
Yes, since it seems it is needed for both your finances and your mental health.
How can I be more tax and savings efficient?
See the advice in cherijoe's post

Congrats, you are in great shape. Take the package. All the stuff above is just extraneous. Take the package because even if you keep working it should not be at the place you currently work. Worst case is you cut your spending. $48k even if $8k is going to health insurance and $12k to property tax, etc still leaves $28k, which is a substantial amount.

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Ged
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Re: Voluntary Separation Package Advice

Post by Ged » Sat Feb 15, 2014 8:30 pm

KyleAAA wrote:I know in my state, severance packages completely disqualify you from collecting unemployment. How many months worth of pay is the lump sum? In my state, that's how many months you'd be ineligible for benefits. You should first find out if you can even collect before making any plans.
That is not the case in NJ. Severance pay that is not a continuation of employment (like a lump sum) does not disqualify you from collection unemployment payments.

Here is a description from the NJ DOL site:

Q. Should I wait until my severance pay ends to file a claim?

A. No, because some severance/separation payments do not extend employment. You should file your claim after you stop working full-time. Payments that do not extend employment include severance payments based on years of service with an employer. However, salary continuation through termination and payments in Lieu of Notice, do extend employment. When you file your claim by telephone, the agent will review all separation payments with you before the claim filing process is completed. If you file your claim via the Internet, and it appears that your payment for periods after your last date of work may affect your unemployment benefits, you will be scheduled for an interview with a claims examiner.

freddie
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Re: Voluntary Separation Package Advice

Post by freddie » Sat Feb 15, 2014 9:04 pm

I think you are being a bit pessimistic about his insurance costs. Given the MAGI, he should be able to set it up to have a lot of obamacare subsidizes until he turns 65. Figure you income at something like 30k (the other money comes out of savings/taxable accounts) and your looking at paying about 2500 for a silver plan. Through in 1500-2k for other costs.

The numbers are right at the edge. If you plan on moving somewhere cheaper (i.e. sell you NJ home and pocket 150k after buying something cheaper, have lower property taxes,...) you would have a much bigger margin for error.

Personally I would take the offer and hope to find another job. Another 2 or 3 years would really boost SS, reduce the time your retired, and hopefully give you a couple more years of growth.
Saving$ wrote:
stickman731 wrote:I am really laboring over if I should accept the VSP
Reviewing my Quicken spends – I spend between $40,000 – 50,000 / year over the last three years (which includes some work related expenses (gas, lunch, clothing). I will need health insurance which looks around $600-800/month in NJ.
Does your $40k-$50k current spend include income taxes? That will decrease.
However, your other expenses are sure to increase, as yo lose subsidized health insurance and have unlimited free time to travel. If we average it at $45k, add $8k for health insurance and $5k because you will have more time to travel, you will need $58k/year. Sounds like ALOT for a single person. Firecalc indicates a $1.4 mil portfolio with a $58k spend rate over 40 years has a success rate of 78%. If you can cut your total expenses to $48k, you have a 99% success rate over 40 years.


Grt2bOutdoors
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Re: Voluntary Separation Package Advice

Post by Grt2bOutdoors » Sat Feb 15, 2014 10:12 pm

jimb_fromATL wrote:
stickman731 wrote:
Debt: None (house paid-off thanks to Boglehead advice!)

Tax Filing Status: Single
Tax Rate: 28% Federal, 6.7% State


Age: 55 (56 in July) 

The big question is can I survive without a job? Reviewing my Quicken spends – I spend between $40,000 – 50,000 / year over the last three years (which includes some work related expenses (gas, lunch, clothing). I will need health insurance which looks around $600-800/month in NJ.
Just curious, but with a paid for home and company health insurance (up 'til now) how does a single person spend $40-$50K per year?

Seems like there might be some room to cut back on living expenses ... even in NJ.

jimb
It's not uncommon to pay taxes of 15K or more per year in the NY/NJ/CT real estate markets. Then there is some level of home maintenance, car insurance, utilities, groceries, etc. The man is single, could be dating - it's not cheap in NY/NJ/CT.

After reading the OP's explanation re: 2-3 vacations. Well, if you stay in NJ the vacations need to be cut back to 1 and some day trips. Or, move to Florida leaving the snow behind :wink: or some other sun-belt state and be on vacation 300 days a year.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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stickman731
Posts: 282
Joined: Sun Jan 01, 2012 10:42 am
Location: New Jersey

Re: Voluntary Separation Package Advice

Post by stickman731 » Sun Feb 16, 2014 9:22 am

cherijoh wrote:
stickman731 wrote:

See suggestions in blue below:
stickman731 wrote: Current retirement assets

Taxable - $120,000
8.0% Columbia Real Estate Investment (CREEX) (1.05) - REITs are better in tax deferred accounts; Expense Ratio is very high - Sell and purchase Vangaurd REIT in rollover IRA

You have way too much in individual stocks by Boglehead standards; stop reinvesting dividends and add to emergency fund or use for expenses;
In years after receiving lump sum sell down individual stocks and take advantage of 0% cap gains through 15% marginal tax bracket

38.0% Honeywell (HON)- Dividend Re-Investment Plan
5.9% Kimberly-Clark (KMB) - Dividend Re-investment Plan
20.3% New Jersey Resources (NJR) - Dividend Re-Investment Plan
27.8% Various – Vanguard Brokerage

401k - $1,000,000 You are overweighting small cap funds by a huge margin:
VINIX is S&P 500; total stock market index = 80% VINIX + 20% VIETX ; Suggest Total international Index instead of VDMIX)

31.6% Vanguard Inst Index (VINIX) (0.04)
27.7% Vanguard Total Bond Market Inst (VBTIX) (0.07)
15.4% Vanguard Ext Mark Ind Ins (VIETX) (0.12)
15.2% Vanguard Small Cap Index Inst (VSCIX) (0.08)
10.1% Vanguard Dev Markets Index (VDMIX) (0.20)

Roth IRA at Vanguard - $52,000 You should have stock funds in Roth IRA and Bonds in Traditional IRA since stocks have higher expected return
Also consider doing some Roth Conversions from Rollover IRA in years of low income

100% Vanguard Total Bond Market Index (VBTLX) (0.10)
Good luck!
Thank you for the suggestions they are very much appreciated! My current 401K via Fidelity did not have a total stock or international fund available. I actually suggested this to them, but it went on deaf ears. They also did not allow direct downloads to Quicken until I complained. In addition, the manager did not even know the rules on beneficiary designation and this is a Fortune 500 company.


The one point that I did not mention is that the VSP is entirely voluntary and the Company, in its sole discretion, has the right to approve or deny my participation. With my luck, they will deny it.

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stickman731
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Location: New Jersey

Re: Voluntary Separation Package Advice

Post by stickman731 » Sun Feb 16, 2014 9:28 am

Ged wrote:Absolutely do it.

While you are at it seriously consider getting out of NJ too.
I love NJ - family and friends, the seasons (except this year -too much snow),the great restuarants, access to NYC and Yankee Stadium. I do however hear you - I can alway come back for a visit. :P

dgdevil
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Re: Voluntary Separation Package Advice

Post by dgdevil » Sun Feb 16, 2014 10:51 am

stickman731 wrote:
The one point that I did not mention is that the VSP is entirely voluntary and the Company, in its sole discretion, has the right to approve or deny my participation. With my luck, they will deny it.
That's standard wording for all buyout offers, the usual CYA corporate America guff. You can start visualizing idle days on a South Pacific beach or at Yankee Stadium with a high degree of certainty.

btenny
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Re: Voluntary Separation Package Advice

Post by btenny » Sun Feb 16, 2014 11:22 am

Companies always put denial wording in these VSP letters. But the reality is they also put "elgibility requirements" in those letters. And if you are elgible then you fit their criteria for getting the VSP. So they sort of cannot deny you unless they deny everyone. And from my personel experience they might want to deny you but their lawyers will say let everyone go who wants to go. Otherwise any person denied has strong grounds for all kinds of lawsuits and follow up issues.....

Way back when I took my VSP, my boss had big issues approving any VSP reductions. He lost 4 of 6 marketing managers and several other long term middle managers who were all seasoned employees. This VSP was a corporate thing and our division was booming so he did not want to let anyone leave. He was pi**ed and tried to stop all of us from retiring including one guy who was 64. That guy even had retire next year in his annual review before the VSP came along. So the way it was explained to our boss was if corporate let anyone take the VSP in our division they had to let everyone take it. And the 64 year old guy got a outside lawyer who told him he could sue if he was denied. So everyone who wanted to take the VSP was approved. And apparently that is what happens in any of these events.

BUT it is a first come first approval basis until they run out of money so don't wait......
Good luck...

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Cosmo
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Re: Voluntary Separation Package Advice

Post by Cosmo » Sun Feb 16, 2014 12:02 pm

btenny wrote:Companies always put denial wording in these VSP letters. But the reality is they also put "elgibility requirements" in those letters. And if you are elgible then you fit their criteria for getting the VSP. So they sort of cannot deny you unless they deny everyone. And from my personel experience they might want to deny you but their lawyers will say let everyone go who wants to go. Otherwise any person denied has strong grounds for all kinds of lawsuits and follow up issues.....

Way back when I took my VSP, my boss had big issues approving any VSP reductions. He lost 4 of 6 marketing managers and several other long term middle managers who were all seasoned employees. This VSP was a corporate thing and our division was booming so he did not want to let anyone leave. He was pi**ed and tried to stop all of us from retiring including one guy who was 64. That guy even had retire next year in his annual review before the VSP came along. So the way it was explained to our boss was if corporate let anyone take the VSP in our division they had to let everyone take it. And the 64 year old guy got a outside lawyer who told him he could sue if he was denied. So everyone who wanted to take the VSP was approved. And apparently that is what happens in any of these events.

BUT it is a first come first approval basis until they run out of money so don't wait......
Good luck...
I went through 3 restructures at my present company (think large energy company) since 2002. Although I never chose to take the voluntary package, I can tell you from experience with other co-workers -they DO indeed deny employees occasionally so I do not believe this is just standard wording. So, YES, they can deny certain employee's requests while accepting others. Trust me, my employer in TX would never do anything that would put them at risk for lawsuits -or at least lawsuits that have a potential for being successful. I am guessing this varies from state to state though.

Good luck to you.

Cosmo

btenny
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Re: Voluntary Separation Package Advice

Post by btenny » Sun Feb 16, 2014 12:38 pm

The problem with denying a single employee for a VSP package is what to do if 1-3 years later you want to fire/layoff that person? What happens if the economy crashes like just happened in 2007? This is the issue for most big commercial employers. What happens if this great guy/gal starts not showing up to work or just becomes a 9-5 worker? Can we lay him off? If they deny you the VSP and then don't offer you a similar package for the next layoff it could become a nighmare. And if they offer you the old VSP package at the next layoff but not other workers what happens?? You get the idea. It can become a mess so most companies just let anyone go who qualifies up to the money they have available for severence pay......

But as Cosmo points out maybe in some industries where business is different and long range and a single employee is more valued that other places the lawyers are willing to gamble. And maybe that also has to do with being in Texas. But that is certainly not the case on most other businesses and places.

cherijoh
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Location: Charlotte NC

Re: Voluntary Separation Package Advice

Post by cherijoh » Sun Feb 16, 2014 1:02 pm

btenny wrote:Companies always put denial wording in these VSP letters. But the reality is they also put "elgibility requirements" in those letters. And if you are elgible then you fit their criteria for getting the VSP. So they sort of cannot deny you unless they deny everyone. And from my personel experience they might want to deny you but their lawyers will say let everyone go who wants to go. Otherwise any person denied has strong grounds for all kinds of lawsuits and follow up issues.....

Way back when I took my VSP, my boss had big issues approving any VSP reductions. He lost 4 of 6 marketing managers and several other long term middle managers who were all seasoned employees. This VSP was a corporate thing and our division was booming so he did not want to let anyone leave. He was pi**ed and tried to stop all of us from retiring including one guy who was 64. That guy even had retire next year in his annual review before the VSP came along. So the way it was explained to our boss was if corporate let anyone take the VSP in our division they had to let everyone take it. And the 64 year old guy got a outside lawyer who told him he could sue if he was denied. So everyone who wanted to take the VSP was approved. And apparently that is what happens in any of these events.

BUT it is a first come first approval basis until they run out of money so don't wait......
Good luck...
Yes, VSP can have unexpected consequences for the company offering it. I'm pretty sure a lot more people were expected to relocate rather than take to VSP when the site I was working at closed. I know HR really struggled to identify qualified candidates to backfill all the positions that they needed to replace.

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Watty
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Re: Voluntary Separation Package Advice

Post by Watty » Sun Feb 16, 2014 1:10 pm

There is a chance that after certain numbers of application for the separation package are reached then they may withdraw their offer so if you are going to do it is best to apply quickly.

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stickman731
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Re: Voluntary Separation Package Advice

Post by stickman731 » Tue Feb 18, 2014 4:47 am

dgdevil wrote:
PS -If you plan to leave New Jersey at some point, keep the 401(k) with your company and ask them to pay the fees. This gives you ERISA protection.
Can you explain this further? - I tried doing some research but I do not understand. I also thought it was better to move and consolidate your 401K into one IRA.

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frugaltype
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Re: Voluntary Separation Package Advice

Post by frugaltype » Tue Feb 18, 2014 5:05 am

I didn't have time to read all the replies, but about unemployment insurance - you may well qualify for unemployment benefits.

I was at a company doing mass layoffs in California, we got severance packages, we did have to sign I won't sue agreements to get the severance, and we did qualify for unemployment benefits. The company's HR department had talked to the California government department that handles that and gotten affirmation that that was the case.

MP173
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Re: Voluntary Separation Package Advice

Post by MP173 » Tue Feb 18, 2014 8:34 am

I tend to agree with the majority here and say "LEAVE".

A few questions:
1. How long do you have to decide?
2. Without going into too much detail, what is your career? Is there demand for your skills in your area?
3. As a type A personality...what do you expect doing with all that time on your hands?
4. Do you have family members? What are their concerns?
5. NJ seems to be a high tax state. With your home paid off, you could cash out, move to a lower cost state and resume your career.

Be careful with the Obamacare subsidies. Make sure you understand whether or not there are any clawbacks involved. You might be low income/high asset. I do not know the rules, but know enough to suggest you get that clarified.

Good luck.

Ed

dgdevil
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Re: Voluntary Separation Package Advice

Post by dgdevil » Tue Feb 18, 2014 8:37 am

stickman731 wrote:
dgdevil wrote:
PS -If you plan to leave New Jersey at some point, keep the 401(k) with your company and ask them to pay the fees. This gives you ERISA protection.
Can you explain this further? - I tried doing some research but I do not understand. I also thought it was better to move and consolidate your 401K into one IRA.
Yes, you are correct. IRA's generally offer lower fees, more options and more control. But whereas 401(k)s are ERISA-protected from creditors - except ex-spouses and the Feds - the same protections are not always afforded IRAs. It depends on the state. New Jersey is one of the good ones with 100% protection. That could change if you move. In California, for example, rollover IRAs seem (!) to be exempt, but not other plans. New Mexico has zero protection.

So since your existing 401(k) plan seems pretty good, maybe it's best to let it sit there for a bit while you contemplate your exciting options. Some ex-employers may charge you a maintenance fee, so it would be wise to cover this possibility in your VSP contract.

http://online.wsj.com/news/articles/SB1 ... 1239401917

http://www.nytimes.com/2009/04/02/busin ... REDIT.html

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TomatoTomahto
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Re: Voluntary Separation Package Advice

Post by TomatoTomahto » Tue Feb 18, 2014 9:11 am

stickman731 wrote:
Ged wrote:Absolutely do it.

While you are at it seriously consider getting out of NJ too.
I love NJ - family and friends, the seasons (except this year -too much snow),the great restuarants, access to NYC and Yankee Stadium. I do however hear you - I can alway come back for a visit. :P
First, I agree with the majority to take the offer.

Second, re NJ: As a fellow resident, for all of its flaws, one of the reasons that NJ is expensive is that many people want to be here. Another reason is the rampant corruption, but that's not the topic at hand :D
Okay, I get it; I won't be political or controversial. The Earth is flat.

MathWizard
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Re: Voluntary Separation Package Advice

Post by MathWizard » Tue Feb 18, 2014 9:28 am

Take it.

They even may come back and hire you as a contractor if too many leave in one area.
(This happened to my brother). They don't need to pay you benefits, you know the job, and
they can get rid of you at any time.

You may want to think about whether you want to do that, since the oportunity will
probably come as "Would you want to do this?" and they'll want a quick yes/no.

Move from NJ only if the total tax situations means you need to move. Other places may have higher
sales an property taxes, so don't just look at state income taxes.

tim1999
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Re: Voluntary Separation Package Advice

Post by tim1999 » Tue Feb 18, 2014 9:44 am

Take the package. My employer went through this routine, and the people who didn't take it got canned anyway, and were given a less attractive package.

Also consider selling your NJ house (which is probably worth a lot unless you live somewhere like Newark or some parts of S. Jersey) and buying one with a cheaper price and property taxes in eastern PA.

Bacchus01
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Re: Voluntary Separation Package Advice

Post by Bacchus01 » Tue Feb 18, 2014 9:48 am

If your plan is to retire and you can make it work financially, take it.

If you cannot retire and expect to have to find another comparable job, think about it for a bit. Finding a job over 55 can be very, very tough.

downshiftme
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Re: Voluntary Separation Package Advice

Post by downshiftme » Tue Feb 18, 2014 9:57 am

This looks like a generous package, you have the finances to take it and do whatever you want, and you will escape a potentially toxic workplace. Unless there is some complication like you would be eligible for a pension or lifetime healthcare if you stick around another year, this seems like the time to grab the package and start planning your future. Good luck. Seems like you've done a great job of setting yourself up for success.

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tuningfork
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Re: Voluntary Separation Package Advice

Post by tuningfork » Tue Feb 18, 2014 10:39 am

I recently took a similar VSP, although not as generous as yours. I also had a bit more saved so it was a straightforward exercise with Firecalc and other retirement calculators to make the decision. Best decision I ever made.

Regarding the company's ability to deny you, my company said the criteria for denial was whether your role was considered business critical. HR said the typical denial rate was about 1%. I know several people who were denied who had received specific types of bonuses during the prior year that apparently indicated their importance to the company. They might have even signed something to get that bonus that made them ineligible for any package for some number of years. Everyone else I know who applied who had not received such a bonus was accepted. My division VP tried to exempt everyone on my project from taking the package because he thought the project was so important to the company, but HR did not allow such blanket denials (thankfully).

snowman
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Re: Voluntary Separation Package Advice

Post by snowman » Tue Feb 18, 2014 12:28 pm

Simple answer - take the package ASAP!

Years ago, I decided to go on my own with 2 little kids, non-working wife, and very little in savings. I just could not take the corporate politics etc. anymore (I wrote a post about it some time ago, btw – the best decision of my life). You are in much greater shape, you will be fine; this is life telling you it’s time to do something different.

As I was ready to give notice, our mega-corp got acquired by another mega-corp. Within a month or two, VSP was offered to qualified employees. I qualified, and it was no secret to all my people that while I will stay a few more months to volunteer for the package, I will leave the company regardless. While we were all told to keep our intensions quiet, you just cannot stop the rumors flying around about who will take it. It creates very inefficient work environment, so it’s in the best interest of everyone to get it over with very quickly.

The way btenny described it in his posts is exactly how the situation played out. People identified as “irreplaceable” were offered their own packages to stay (so they had in fact 2 offers on the table). My business unit was one of the most profitable in the company, and I and some of my best people were considered “irreplaceable” by my SVP who lobbied really hard with HR not to let us go. The HR slapped him pretty hard every time he tried, for exactly the same reasons btenny already outlined. Long story short – they did not get enough volunteers, so they had to approve everyone that applied! I was in quite a shock – I thought VSP was very generous to long time employees (I was there only 5 years, so not much lump-sum for me), but most of them declined.

Fast forward 6 months (I am already gone at that point). People are going crazy – more work, terrible management, no clear direction. They announce another round, and many people are really ready to take the package now – except that this time, it is not voluntary, and it is not generous at all. Survivors of 2nd round go nuts; too much work, no personal life, no rewards, awful management. Almost everyone starts looking for a job… 6 months later, the 3rd round arrives – except that this time, there is no package, just the 2 weeks’ pay.

I am not saying this will happen to you if you don’t take VSP, but this process is fairly typical. I believe you are in an outstanding position to take it. I would start dreaming about your second career – ski patrol, fishing boat operator, bike maintenance shop, along those lines… Congratulations!

Dulocracy
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Re: Voluntary Separation Package Advice

Post by Dulocracy » Tue Feb 18, 2014 1:33 pm

DualIncomeNoDebt wrote:Accept the package. Accept the package. Accept the package.
frugaltype wrote:Take the money and run.
Take the money. Look for a new job. Let us say that you get a new job that pays $75,000 a year. You now have enough money that you should be able to live without drawing down on your current assets, allowing them to grow. You are not drawing them down, they are growing, and you are maybe even putting a little into some new retirement plan. Even with a pay reduction, working a few more years should keep you solid. Even so, a $200k payout gives you plenty of time to find a new job.

Even if you do not take a new job, you should be fine if you reduce your expenses (gas, clothes, lunch, car, etc.). Take the money.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

ljb1234
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Re: Voluntary Separation Package Advice

Post by ljb1234 » Thu Aug 06, 2015 7:20 pm

stickman731 wrote:
Ged wrote:Absolutely do it.

While you are at it seriously consider getting out of NJ too.
I love NJ - family and friends, the seasons (except this year -too much snow),the great restuarants, access to NYC and Yankee Stadium. I do however hear you - I can alway come back for a visit. :P

BTW,
I have been to NJ many times and enjoyed it. Especially Cape May. Very nice there.

regards,

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