Just Got the Buyout Offer

[Ben_Who]

I can't say I didn't see it coming. This round of layoffs isn't because the business can't meet payroll, or is teetering on the brink of bankruptcy, or anything too devastating. In fact, given that I can get an idea of the company finances from where I'm sitting, it actually looks like the company is coming out of the woods - a miracle in a declining industry. Unfortunately, the new machinery doesn't need as many operators. They got fifteen people sitting around our department with nothing to do.

Doing layoffs when the company is actually a bit flush means that they can afford to be generous with the buyout package. And generous it is. With a potential final date three MONTHS in the future, the package involves weeks of severance, a signing bonus, continued healthcare, even career counseling.

Because I have two dependents named Visa and MasterCard (I'm stupid about money) I wasn't going to touch the buyout with a barge pole, but the buyout bonuses would erase the credit card debt with a bit left over besides. If not for the credit card debt, it'd be a golden parachute.

There are a monumentally huge number of factors to consider before I even think about signing off on this thing, but I think the biggest cause of my anxiety right now is the fact that I don't know how to be unemployed anymore. I got this job from a newspaper classified ad shortly before the death of Princess Diana, and started when "MMMMBop" by Hanson was topping the charts and the number one film was Jurassic Park II. I've never had to file for unemployment, haven't updated my resume since 2011, and haven't seriously been hurting for money since before the Clinton impeachment. I haven't run all the numbers for how long that severance will last - there are three possible budget scenarios based on the tax bite - but it won't last forever.

Or I might sign the thing and they decide not to take it because they already got enough applicants.

Or I don't sign the thing and they lay me off anyway because they didn't get enough applicants.

...Argh.

Anywho, my brain is doing that thing where it tries to apprehend all potential possibilities at the same time, which is a thing that actually put me in therapy for a while last year, and since it's stupid 'o clock (I work nights) and I need to pour my heart out somewhere, well, here I am...

[AccountingDrone]

Rough/

Personally, I hate debt, and would go for the package and *immediately* pay off everything.

And then cut up the damned cards.

[It's me]

Don't forget... you will have to pay income tax on whatever amount they give you. And if you get another job fairly soon the buyout money may end up being effectively taxed at a higher rate as your total annual income would be higher.

Might still be worth going for and paying down debt.... but do the math so you don't end up having to borrow money to pay the tax man.

[Ben_Who]

Don't forget... you will have to pay income tax on whatever amount they give you. And if you get another job fairly soon the buyout money may end up being effectively taxed at a higher rate as your total annual income would be higher.

Might still be worth going for and paying down debt.... but do the math so you don't end up having to borrow money to pay the tax man.

There are two buyout options that avoid paying usurious amounts of money to the tax-man. One way is to just continue to collect a paycheck for the duration of the severance. Since the severance date is December 5, that means most of the money would be earned in 2015. While it'd be nice to continue to earn a paycheck for the duration of the severance, this wouldn't let me wipe out the credit cards, so I'd be paying more credit card interest. There also might be a problem with collecting unemployment; Maine has a law that states that you can't collect unemployment until severance runs out. The buyout contract can override that, but I don't know if it does.

The other way is to defer the one-time payment until January 1. This would put the entire severance amount in 2015. I could wipe out the cards and get favorable tax conditions with this plan, but it means I wouldn't have a plugged nickel in the most expensive month of the year - to the point where my roommate would have to buy me groceries.

I'm pretty sure the severance check will include withholding; I don't think they can give a lump sum for the gross amount and say, "Well, the taxes are all on you," but if I did take the lump sum on the severance date, 2014 would be - by MILES - my highest-earning year EVER, with nearly $60,000 in gross earnings and outside income, and the taxman WILL take notice.

Way more information than anyone needed, but I'm just thinking aloud.

[Kittish]

Under the circumstances I think I'd go with the option that lets you get the lump payment after the first of the year. Maybe see about making arrangements with your roommate now for him to cover you til then, then pay him back out of that lump sum. Tax rates (at least in the U.S.) jump a LOT when you go up from one tax bracket to another, it could be enough to wipe out the benefit of taking the buyout package. And taking a lump sum after the first of the year just MIGHT let you start drawing unemployment during the last month or two of THIS year, since you will be officially laid off.

[MoonCat]

Is there a financial consultant you could talk to (who wouldn't charge too much)? They can help you figure out what's best. If you are a union member, they can probably recommend someone. If not, try checking with the state labor dept or finance dept.

Also, might be a good idea to start job-searching now. If you got lucky you might have something lined up for the new year.

[taxguykarl]

If and when you apply for unemployment, don't forget to have withholding...yes, both federal and state. Every other client of mine who ended up owing did not.

Definately schedule an appointment with the career counselor being provided and look into some kind of financial advisor a call-in host at the least.

Yes it is likely that your severance package will include withholding.

[Ben_Who]

Pop the Popcorn

I get to tell everybody "Waah! I got laid off just before Christmas!"

I DON'T have to tell them that I'd keep receiving paychecks straight through to September 11, 2015.

Should be good for a pretty big pile of presents.