When the consulting companies are done offering advice to your corporation on how to make it more effective, the one word you don’t want to hear from upper management is “reorg”. Reorg, short for reorganization, if often a labor intensive process where a large organization systematically eliminates a section of the workforce to streamline their overall processes, people, and systems. When these reductions in workforce happen, one of the possibilities that may occur is to offer you a severance package. The problem for most families is that decisions have to be made so quickly that people often make poor choices on how to best maximize this package.
Here are five smart money moves to make when you are offered a severance package.
- Double Dip On Pay
If your company offers you six months or one year as a severance package, this is not the time to take an extended vacation. Every month that you can work for a new employer gives you a month that you can bank your severance. This is the philosophy for double dipping on salary.
- Utilize Transition Resources
It will cost you a good amount of money to hire a resume writer or use job outplacement type services. Through the severance package you receive, your company will offer you a multitude of resources to brush up your professional appearance and help you find avenues to find a new job.
- Take Advantage Of Your Health Insurance
It is important to examine where you are at year to date with your family deductibles and closely review the quality of your company health insurance. Before you have any lapse in coverage, it is a good idea to go see doctors, specialists, dentists, or other professionals covered under your insurance.
- Understand Your Non-Compete
All big companies will ask you to sign a release of claims letter before they turn over a dime to you. While most people getting severance don’t really read these documents, you do want to understand if you have a non-compete, a non-solicit, and most importantly is there a mileage clause on how far away you have to travel if you want to work in the same job in the same industry.
- Can You Still Contribute To Retirement Plans
All severance packages can be worded slightly differently depending on the level you are at within your company. You should find out if you are eligible to still contribute to retirement plans or more importantly are you allowed to rollover your 401k to an IRA if you choose to do so after you sign the paperwork. Examine your final paycheck closely to make sure all accrued PTO or other benefits are paid out to according to the severance package.
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.