The decision of when to retire is one of the biggest you can ever make. An early retirement offer from Verizon, whether an ISP, EISP, or Special EISP, can result in you having to accelerate that decision within a relatively short amount of time. For this reason, receiving an offer can be as stressful as it is exciting. The more you can do ahead of time to prepare yourself for receiving an offer, the better equipped you will be to make such an important decision.
There are many factors and considerations that every Verizon employee should think about when presented with an early retirement offer and trying to decide whether or not to take it. Let’s take a look at each of them.
What Exactly Is an Early Retirement Offer?
First, let’s quickly review what an early retirement offer from Verizon is. An early retirement offer is a financial incentive from Verizon provided to its employees to entice them to consider a retirement date that may potentially be earlier than they originally planned. Each offer is presented to different employee groups at Verizon. There are three types of offers—ISPs, EISPs and Special EISPs—each differing by how robust the financial incentive is that is paid out to the Verizon employee who takes the offer.
If you’d like to learn more about the specific differences between each of the three types of early retirement offers from Verizon, watch this video on our Verizon Retirement YouTube channel (and make sure to subscribe if you haven’t already).
Should You Take an Early Retirement Offer?
As a Verizon employee, you may already know that the timeframe you have to decide whether or not to take an offer and retire early is relatively short—typically 30 to 45 days from the time the offer is presented to you. In the grand scheme of things, that’s not a lot of time to make one of the most important decisions of your life. To help you prepare for this situation, let’s take a look at each of the factors every Verizon employee should consider when deciding whether or not to take an offer.
Understand What the Offer Is
First, get to know the specifics of the particular offer you have been presented. What type of offer is it? What is the offer deadline? What are the voluntary termination bonus, payment allowance, and expense allowance? How will your medical benefits be handled?
All this information can be found in detail in the offer packet that will be provided to you by Verizon when you first receive the offer. Read through it as many times as you need to, and we recommend having your financial advisor read through it as well.
Dust off your retirement income plan that is based on your original goal retirement date. Update it with the components of this offer (the earlier retirement date and monetary payouts) and see what this potential new scenario might look like for you and your family. Your advisor can and should help you with this. Don’t hesitate to lean on them for support.
Questions to Ask Yourself
Ask yourself these questions and consider these factors when deciding whether or not to take an early retirement offer from Verizon:
Am I already close to my original goal retirement year? Whether or not you take an early retirement offer is, in its simplest form, a break-even analysis. Is it worth giving up additional years of your salary, saving into your 401(k), growing your pension benefit, and not withdrawing from your wealth for income? Is the financial incentive (the voluntary termination bonus and payment allowance) worth it to retire early? In our experience of working with countless Verizon employees considering an offer, we have found that the closer you are to your original projected retirement date when you receive an offer, the more it financially makes sense to take it and retire early. Specifically, we see that Verizon employees already within six to 12 months of their original retirement date are inclined to take an offer. It is going to differ from one individual to the next, however.
Am I fully retirement-eligible? Being fully retirement eligible (based on age and years of service at Verizon) means that you are entitled to your full pension benefit and retiree healthcare benefits. Not being fully retirement-eligible will result in a potentially significant decrease in the monetary value of the pension benefit available to you at retirement as well as a decreased spectrum of healthcare benefits you are entitled to throughout retirement. For this reason, many Verizon employees who receive a retirement offer but are not yet retirement-eligible choose not to take the offer.
Would the termination bonus and payment allowance make a difference for me financially? A lot of Verizon employees we work with have a goal of completely paying off their debt obligations before they retire (for example, a car payment or mortgage balance). The termination bonus and payment allowance could help you in paying down that debt obligation. These monetary payouts could also help in delaying the start of withdrawals from your investments for income for a period of time. Typically, the longer you can wait to start distributions from your accounts, the better the trajectory of your wealth throughout retirement will look.
How does this earlier-than-expected retirement date coincide with my Social Security filing strategy? For many Verizon employees, Social Security income is an essential component of their retirement income plan. Retiring earlier than expected as a result of receiving an offer could result in a larger-than-expected number of years before you can take your Social Security benefit. It’s important to work through each of these questions when deciding whether or not to take an offer.
- How might your Social Security filing strategy need to change?
- Can the monetary payouts from the offer and potential withdrawals from your investments bridge the gap until you reach your originally planned Social Security start date?
- Are you going to need to start your Social Security benefit earlier than planned?
- Depending on how much earlier you retire with the offer before you can take Social Security, can you afford to do so?
- Will your Social Security benefit be reduced as a result of you retiring earlier than originally planned?
If I’m retiring before age 59 ½, how can I access my money for income? When it comes to withdrawals from retirement accounts (401(k)s, IRAs, etc.), age 59 ½ is the point at which you can take unlimited distributions whenever you’d like without incurring additional tax penalties. So what if you are considering an early retirement offer and you’re younger than 59 ½? There are several strategies available to you to avoid these additional tax penalties, and the one that is right for you is going to be a personal decision based on your total assets, income needs, and the specific age at which you retire. Make sure to work with your advisor and illustrate each of these strategies to see which one works best for you—or if any of them financially make sense for you at all. If none of these strategies make sense to implement, it might not be worth taking an early retirement offer.
Will I be finding employment elsewhere or will I be fully retiring after this offer? Taking an early retirement offer and retiring from Verizon doesn’t necessarily mean you have to retire fully, and a lot of Verizon employees choose not to. When determining whether taking an offer from Verizon is financially feasible, a part- or full-time job afterward can bridge the income gap until it is more reasonable to start distributions from your investments. This can make or break your decision of whether or not to accept an early retirement offer from Verizon.
Build a Retirement Plan That’s Right for You
Ultimately, whether or not you take an early retirement offer from Verizon is a personal choice. The next time you receive an offer, look at the factors listed in this blog post and answer them for your individual situation. If you haven’t already, try putting together a “base plan” for your ideal retirement date that illustrates your expected annual retirement income and expenses so that you have this to work from when presented with an early retirement offer.
Hapanowicz & Associates isn't affiliated with Verizon, but we’ve been helping Verizon employees get the most out of their retirements since 1999.
Speak with a Hapanowicz & Associates Verizon retirement advisor today to find out how we can help simplify your retirement planning.