When Don and Marge Thompson were presented with a buyout offer in 2003, they had to think long and hard.

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1 Step down in style Look at all that's involved before taking a buyout 12:00 AM CDT on Monday, April 10, 2006 By PAMELA YIP / The Dallas Morning News When Don and Marge Thompson were presented with a buyout offer in 2003, they had to think long and hard. "We had a lot of discussion back and forth," says Mrs. Thompson, 56. They totaled up their assets and obligations. They contacted their financial planner and had him analyze the offer. When he gave the OK, the Lewisville couple decided to take the offer from Verizon Communications Inc. Today many employees face similarly tough decisions about whether to accept early-retirement offers. General Motors Corp. has agreed to finance buyouts for as many as 131,000 workers at GM and parts supplier Delphi Corp. The buyouts would range from $35,000 for those with the most service to $140,000 to certain others further from retirement age. A buyout may seem enticing at first, but assessing whether it's the right package for you is a step-by-step process. First, the obvious question: Are you ready for retirement? "If the employee's assets are ample, do they have hobbies or organizations that will keep them busy and fulfilled during retirement?" asks Mark McClanahan, a financial planner at Baker Financial Services in Arlington.

2 "Will they become tired of golfing or fishing every day? Have they ever practiced retirement? Where will they live?" The Thompsons, former managers for Verizon's offices in Irving, wanted an active retirement. "I didn't want to quit work and just sit down somewhere," says Mr. Thompson, 56, who now does woodworking. "That's not what I wanted to do in life." Mrs. Thompson engages in genealogy. Doubts linger For some employees, the question of whether they made the right decision lingers even after they've accepted the buyout offer. "I knew financially, I could do it," says Sherry Phelps, former director of employment at Southwest Airlines Co., who took a buyout in "For me, it was, Am I ready? I worried about that even after I made the decision." Her move turned out to be the right one. "Now, I get to have a weekend every day, and I love that," says Ms. Phelps, 56, of Bartonville. She enjoys meeting with friends, relaxing each morning on her front porch which she calls "Veranda Beach" and enjoying her newspaper, coffee and the chirping birds. "I know them all by their call now," Ms. Phelps says. An emotional decision For some long-time employees of a company, deciding to depart can stir up lots of emotion. "The nonfinancial [area] is where we spend the biggest amount of time when we work with someone who is looking at, 'Does this buyout offer really fit with what I want to do?' " says Colleen O'Donnell, a certified financial planner at Lincoln Financial Advisors in Dallas.

3 "Very often, a buyout issue is more personal, especially for someone who has worked for a firm for a long time, or sometimes generations." She's had clients whose employers paid for their college educations and "now they are 50 and getting a buyout offer." "For most of these clients, it is a huge sense of loss," Ms. O'Donnell says. Ms. Phelps, one of Southwest's original employees, personified that. "By the time I left, I thought I was going to have withdrawal and emotional pain," she says. But she was comforted by the fact that her daughter joined Southwest in a customer-relations position shortly before she left. "I felt I was passing the torch from one generation to the next," Ms. Phelps says. Can you afford it? Once you've decided to give the buyout offer a shot, it's time to crunch the numbers. "The thinking process should be, 'Do I have enough money in my savings account, my 401(k), my pension, in case I can't get another job?' " Mrs. Thompson says. "You have to be concerned that you may never get another job even if you want one, so if you can't afford to do it without ever working again, I would suggest you don't do it." It can be especially difficult if you still have family obligations. For example, Do you have a college-bound child that you haven't saved enough for the education? Are your job skills valuable in today's business world? "Is the employee marketable?" asks Mr. McClanahan of Baker Financial Services. "Could they continue to work and make enough money to maintain their standard of living?" What helped the Thompsons was section 72(t) of the Internal Revenue Code, which allows for penalty-free early withdrawals from qualified retirement plans through what the IRS calls "substantially equal periodic payments" for at least five years.

4 "We knew a 72(t) was the only thing we could do or we would have to get other jobs," Mrs. Thompson says. Health care costs Don't forget to factor in health care costs. With many companies cutting back on retiree health care benefits, health care costs have soared to the top of retirees' concerns. "We were lucky in that we have health insurance," Mr. Thompson says. "That's important, especially when you're approaching the 60s and 70s." Their health insurance is provided by Verizon, but the Thompsons pay a portion of the premiums. Structuring the payout The Thompsons took their pension benefits in a lump sum. That's something you also need to consider, especially if you don't manage money well. "Lump-sum payments transfer the risk of money management responsibility to the employee, but have the advantage of being inheritable by the family if the employee dies," says Trudy Turner, a Dallas certified planner and president of the Dallas-Fort Worth chapter of the Financial Planning Association. "Annuity payments for corporations usually remain constant for life, thus lose purchasing power from inflation over time." On the other hand, you need to evaluate annuity payments for survivor benefits, she says. "Spouses automatically get 50 percent survivor benefits unless they sign away this right, which can happen if clients are only looking at the highest payout. But what happens to the spouse if the retiree dies and payments end?" asks Ms. Turner of Robertson, Griege & Thoele. If you decline the buyout offer, understand what you're leaving on the table. Ms. Turner says the sweeteners a company may dangle include: adding years of service to your pension calculation, which raises your pension benefits; adding bonus payments for taking the buyout;

5 including eligibility for and/or extension of retiree medical benefits; adding supplemental payments when early retirees aren't yet eligible for Social Security benefits. Also understand this risk. If you turn down the offer, it may never come again. A good call The Thompsons left at the right time. At the end of last year, Verizon announced that it would freeze the guaranteed pension plan covering 50,000 of its managers. In exchange, it would expand its managers' 401(k) plans. After June 30, managers will no longer earn pension benefits or receive additional credits toward retiree medical benefits. "In many cases, companies' buyout packages have gone down in value each successive time they've offered it," says Ms. O'Donnell of Lincoln Financial Advisors. What's worse, if you don't take the buyout, you risk eventually being booted from your job with no incentive package at all. The Thompsons considered those risks when evaluating their buyout offer in "We knew that was never going to come back again," Mrs. Thompson says. "They've never made another offer like it, and they'll never again."

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