Tag Archives: financial



How to evaluate an early retirement offer and see if it’s the right move for you.
Risks and upsides to early retirement

In today’s corporate environment, cost cutting, restructuring, and down­sizing are the norm, and many employers are offering their employ­ees early retirement packages. But how do you know if the seem­ingly attractive offer you’ve received is a good one? There’s a simple answer: By evaluating it carefully to make sure the offer fits your needs.

What’s the Severance Package?
Most early retirement offers include a severance package that is based on your annual salary and years of service at the company. For example, your employer might offer you one or two weeks’ salary (or even a month’s salary) for each year of service. Make sure the severance package will be enough for you to make the transition to the next phase of your life. Also, make sure you understand the payout options available to you. You may be able to take a lump-sum severance payment and then invest the money to provide income or use it to meet large expenses. Or you may be able to take deferred payments during several years to spread out your tax bill on the money.

How Does this Affect Pension?
If your employer has a traditional pension plan, the retirement benefits you receive from the plan are based on your age, years of service, and annual salary. You typically must work until your company’s normal retirement age (usually 65) to receive the maximum benefits. This means you may receive smaller ben­efits if you accept an offer to retire early. The difference between this reduced pension and a full pension could be large, because pension benefits typically accrue faster as you near retirement. However, your employer may provide you with larger pension benefits until you can start collecting Social Security at age 62. Alternately, your employer might boost your pension benefits by adding years to your age, length of service, or both. These types of pension sweeteners are key features to look for in your employer’s offer, especially if a reduced pension won’t give you enough income.

What about Health Insurance?
Does your employer’s early retirement offer include medical coverage for you and your family? If not, look at your other health insurance options, such as COBRA, a private policy, or dependent coverage through your spouse’s employer-sponsored plan. Because your health care costs will probably increase as you age, an offer with no medical coverage may not be worth taking if these other options are unavailable or too expensive. Even if the offer does include medical coverage, make sure you understand and evaluate the coverage. Will you be covered for life or at least until you’re eligible for Medicare? Is the coverage adequate and affordable (some employers may cut benefits or raise premiums for early retirees)? If your employer’s coverage doesn’t meet your health insurance needs, you may be able to fill the gaps with other insurance.

What about Other Benefits?
Some early retirement offers include employer-sponsored life insurance. This can help meet your life insurance needs, and the coverage probably won’t cost you much (if anything). However, continued employer coverage is usually limited (for example, one year’s coverage equal to your annual salary) or may not be offered at all. This may not be a problem if you already have enough life insurance elsewhere or if you’re financially secure and don’t need life insurance. Otherwise, weigh your needs against the cost of buying an individual policy. You may also be able to convert some of your old employer cov­erage to an individual policy, though your premium will be higher than when you were employed.

In addition, a good early retirement offer may include other perks. Your employer may provide you and other early retirees with financial planning assistance. This can come in handy if you feel overwhelmed by all of the financial issues that early retirement brings. Your employer may also offer job placement assistance to help you find other employment. If you have company stock options, your employer may give you more time to exercise them. Other benefits, such as educational assistance, may also be available. Check with your employer to find out exactly what its offer includes.

Can You Afford It?
To decide if you should accept an early retirement offer, you can’t just look at the offer itself. You have to consid­er your total financial picture. Can you afford to retire early? Even if you can, will you still be able to reach all of your retirement goals? These are tough questions that a financial professional should help you sort out, but you can take some basic steps yourself.

Identify your sources of retirement income and the yearly amount you can expect from each source. Then, estimate your annual retirement expenses (don’t forget taxes and inflation), and make sure your income will be more than enough to meet them. You may find that you can accept your employer’s offer and likely still have the retirement lifestyle you want. But remember, these are only estimates. Build in a comfortable cushion in case your expenses increase, your income drops, or you live longer than expected.

If you don’t think you can afford early retirement, it may be better not to accept your employer’s offer. The longer you stay in the workforce, the shorter your retirement will be and the less money you’ll need to fund it. Working longer may also allow you to build larger savings in your IRAs, retirement plans, and investments. However, if you really want to retire early, making some smart choices may help you overcome the obstacles. Try to lower or eliminate some of your retirement expenses. Consider a more aggressive approach to investing. Take a part-time job for extra income. Finally, think about electing early Social Security benefits at age 62, but remember that your monthly benefit will be smaller if you do this.

Finding a New Job
You may find yourself having to accept an early retirement offer even though you can’t afford to retire. One way to make up for the difference between what you receive from your early retirement package and your old paycheck is to find a new job, but that doesn’t mean you have to abandon your former line of work for a new career. You can start by finding out if your former employer would hire you as a consultant. Or, you may find that you would like to turn what was once just a hobby into a second career. Then there is always the possibility of finding full- or part-time employment with a new company.

For the employee who has 20 years of service with the same company, the prospect of job hunting may be terrifying. If you have been out of the job market for a long time, you might not feel comfortable or have experi­ence marketing yourself for a new job. Some companies provide career counseling to assist employees re-entering the workforce. If your company does not provide you with this service, you may want to look into corporate outplacement firms and nonprofit organizations in your area that deal with career transition.

Many early retirement offers contain noncompeti­tion agreements or offer monetary inducements on the condition that you agree not to work for a competitor. However, you’ll generally be able to work for a new employer and still receive your pension and other re­tirement plan benefits.

What If You Say No?
If you refuse early retirement, you may continue to thrive with your employer. You could earn promotions and salary raises that boost your pension. You could receive a second early retirement offer that’s better than the first one. But you may not be so lucky. Consider whether your position could be eliminated down the road.

If the consequences of saying no are hard to predict, use your best judgment and seek professional advice. But don’t take too long. You may have only a short window of time, typically 60 to 90 days, to make your decision.

MARK A. VERGENES, is president of Financial Partners and chair of the Lancaster (Pa.) Parking Authority. He can be reached at mark@mirusfinancialpartners.com

TPP-2017-01-Early Out? Not so fast. 



No More Procrastination

TPP-2016-01-No More ProcrastinationBy Mark A. Vergenes

Human beings are natural procrastinators. Most people struggle with the temptation to put things off until that last minute—particularly those tasks we don’t enjoy. How many times have you claimed to “work better under pressure” or promised yourself to finish a task when you had more time to focus?

While it may be possible to crunch out a report at the last minute or even throw together a major family get-together in a few days, saving and financial planning is one of those things that is a process. You need to work on it steadily over the course of years. Every month you put off developing and contributing to your own financial plan, your chances of success get smaller and smaller.

The truth is if you’re relatively young and you’ve already developed a financial plan to get you through to retirement, you’re the exception. But if don’t have a solid financial plan in place, now is the time to start.

Why Plan?
You need to make accommodations for several significant life events. During the course of your life, you’ll probably experience a series of major expenses that can’t be covered without a thoughtful savings and investment plan. These may include homes, cars, college, medical expenses, retirement, and the death of one of your family’s breadwinners.

Most people understand how to budget for expenses such as homes and cars. When planning, people decide how much to spend and then decide how to pay for these expenses with cash, credit, or a combination of both. These expenses are budgeted into a monthly income and are protected with adequate savings.

However, when it comes to life’s other major expenses—college, medical expenses, retirement, or the death of a family breadwinner—many people procrastinate and are less prepared.

While it may seem hard to get started, many parking professionals already have access to many easy-to-­implement savings, investment, and insurance options.

Automated Retirement Plans
Whether it’s an individual retirement account (IRA), a 401(k), a pension, or another type of plan, ­company-sponsored retirement savings plans offer a couple of important benefits. One of their most important features is that they are deducted from your paycheck, automatically funding your plan. Many benefits that are deducted from your paycheck are pre-tax, which means the amount you contribute is more than the reduced amount you would otherwise keep in your take-home pay. However, all plans have a capped amount. If your capped amount is less than your actual savings needs, you should discuss additional investment and savings options with a qualified financial adviser.

Matched Contributions
Some employers will match the contributions you make dollar-for-dollar up to a certain percentage of your pay. Others may match a portion or percentage of each dollar you contribute. Regardless, it’s free money. Having your employer contribute right along with you makes your retirement account grow faster than if you were the only one putting money in. And most of these matches are made pre-tax, which significantly reduces the effect on your take-home pay.

Vesting is a way for employers to encourage you to stay with them. Basically, it means that while you have full ownership of your own contributions, you’ll only gain access to your employer’s contributions after a designated period of time. Vesting can happen two ways: A graduated vesting schedule gives you increased ownership of the employer funds over time until you’re fully vested and own 100 percent of the money. A cliff-vesting schedule withholds ownership until you’ve completed a certain number of years of service, at which point you become 100 percent vested. Once your employer’s contributions are fully vested, they’re yours and you can take them with you if you leave.


Insurance benefits vary widely from employer to employer. Evaluate each benefit to make sure it makes sense for you and your financial plans. Be sure to investigate if your employer offers short- or long-term disability, dental benefits, vision benefits, and corporate life-insurance plans. Be sure to find out out what happens to your benefits if you become ill, are hurt on the job, or are hurt when you’re not working.

It’s critical to understand if employer options are enough. Do you know how you are you going to handle life’s other major expenses—retirement, college, medical expenses, and the death of a spouse or breadwinner?

While we all fantasize that our talented children will get a full scholarship, it’s not a reliable savings plan. But don’t let yourself get overwhelmed by big numbers and pricey educations. Even modest savings can pack a punch if you give them enough time to grow.

Investing just $25 a week for 18 years will yield $48,000, assuming an 8 percent average annual return (and assuming no taxes). Investing your savings wisely may allow you to maximize your savings. If you didn’t start saving the week your child was born, don’t give up hope. Even a little savings helps. Talk to your financial adviser and you’ll be able to develop a plan that will help your child cover at least some of his or her college costs, even if college is just around the corner.

You should also explore financing options that include federal, state, and private grants and loans. And finally, make sure you are not planning to use retirement savings to finance college expenses. Your children will have a lifetime to pay off college, but you won’t be able to easily rebuild retirement savings.

Medical Expenses

While recent changes in health care have made some people more confident about their ability to handle major medical expenses, medical expenses are still one of the most common reasons for bankruptcy. It’s critical to ensure your insurance will continue even after you begin disability, and it’s wise to check out disability insurance to help your family get through extended illnesses or rehabilitation periods. Financial planners can help you determine your needs, your ability to pay, and refer you to reputable health insurance representatives.

Death of a Breadwinner
Whether your home is a one-, two-, or even three-income family, it’s important to think through what will happen if one or more income sources pass on or are unable to work. What happens to your mortgage? Car payments? Who takes care of your children? Is an elderly relative relying on your income? Developing a will and ensuring your life insurance is enough to get your family through the death of a loved one is critical to your family’s financial well-being.

It’s easy to procrastinate on life insurance if you’re part of a young, healthy family. According to a July 2014, article in U.S. News and World Report, three in 10 households in the U.S. have absolutely no life insurance whatsoever. And many people with life insurance don’t have enough coverage. According to a 2014 survey by New York Life Insurance, people surveyed said they needed an average of $540,000 worth of insurance but were insured for only $220,000.

You shouldn’t rely on guesswork when making decisions that affect you and your family. Get help to work through these financial hurdles and develop a plan that addresses a wide variety of changes.

While you may already be contributing to a ­company-sponsored retirement plan, you should still map out exactly what your retirement looks like, what your income may be, and what kind of savings you need to finance your lifestyle.
People are living longer than ever before, and if you retire at 65, you may be looking at 30 years of retired living. If you’re one of the many people who underestimate how long you’ll live in retirement, you may find yourself running out of money.

For some people, expenses decrease in retirement. Maybe their house is paid off and children are on their own. But others find that their retirement comes with unexpectedly high price tags. You may need to continue to support family members, your home may not be worth as much as you expected, or you may incur major medical expenses for yourself, your spouse, or another family member.

Often, Social Security doesn’t cover your retirement expenses. According to the U.S. Census Bureau, today’s retiree draws less than half his or her income from Social Security. The rest must come from other sources, such as personal savings and pension plans or, for some, part- or full-time employment.

Inflation may also take a bite out of your retirement savings. Remember, your dollar may buy a lot less in the future than it does today.

It’s important to know that financial planning professionals make recommendations, not decisions. You control your finances. A good planner will make recommendations based on your needs, values, goals, and time frames. You decide which recommendations to follow and then work with a financial professional to implement them.

MIRUS Financial Partners nor Cetera Adviser Networks LLC. give tax or legal advice. Opinions expressed are not intended as investment advice or to predict future performance. All information is believed to be from reliable sources; however we make no representations as to its completeness or accuracy. All economic and performance information is historical and indicative of future results. Articles prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2015.

Mark A. Vergenes is president of MIRUS Financial Partners and chair of the Lancaster (Pa.) Parking Authority. He can be reached at mark@mirusfinancialpartners.com.

TPP-2016-01-No More Procrastination