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Question: I am 62 with $4 million saved for retirement. My wife and I have worked hard to pay off our mortgage, and we have no debt. Our kids are successful and have independent lives.
I love my tech job, earning $250,000 a year, and didn’t plan to retire until at least 67, when I reach full retirement age. Unfortunately, my company is going through a round of downsizing, and I was just offered a buyout that includes six months of severance and six months of health insurance.
I’m not sure whether to accept the offer and retire or decline it. I’m afraid we won’t have enough money for retirement if I take it, but I’m also worried the company could struggle, and I’ll eventually be out of a job anyway. My wife doesn’t work, so this decision will have a big impact on her lifestyle. What should I do?
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Answer: You are not alone. Unfortunately, buyouts and layoffs are common in the current environment, particularly in the technology industry.
According to one estimate, over 81,000 tech jobs have been lost in the first quarter alone. Meanwhile, Microsoft just offered buyouts to about 7% of its U.S. workforce, the first time in the company’s 51-year history.
Deciding whether to take a buyout is a big deal at age 62. After all, it typically means retirement. Sure, you can consult or get another job, but one that matches your current role and salary will undoubtedly be hard to find.
Of course, your job provides more than financial security. You have to consider both the financial and emotional aspects of taking a buyout. Working with a financial adviser may come in handy.
“I have one client who gets away with spending $3,000 a month and another who spends $50,000 a month.” — Stephanie Bruno
The financial side of the decision
Let’s start with the financial piece of the decision. Whether or not $4 million is enough for retirement at age 62 depends on your lifestyle.
“I have one client who gets away with spending $3,000 a month and another who spends $50,000 a month,” says Stephanie Bruno, a partner and senior wealth advisor at Mission Wealth. “Having most of your housing costs covered is great, but there are still issues that can make it expensive, like insurance and real estate taxes.”
That’s particularly true if you live in a state prone to natural disasters, such as California or Florida, or if you live in a sprawling home that is expensive to heat and cool. There are also maintenance costs to consider.
Having $4 million in savings is a huge plus, given that the median retirement savings for a person aged 62 is less than $200,000, says Bruno. But if you and your wife are healthy, you could face thirty or more years without your $250,000 a year salary.
Social Security pay cut
At 62, you are eligible for Social Security, but if you decide to start claiming before your full retirement age of 67, you will receive an up to 30% reduction in benefits over your lifetime.
That’s another consideration when mulling the buyout: Do you have enough cash flow to wait to collect Social Security until 67, or will you need it now? If so, are you OK with less money? After all, six months of compensation is great, but you’ll have to wait five years until you can collect all your benefits.
Sure, you can withdraw from your retirement savings, but do you want to start doing that earlier than you planned? If you do so in a down market, you could end up with less money to live on later. That’s known as sequence of return risk, and it’s a real issue for retirees.
Plus withdrawals, if they come from a traditional 401(k) or IRA, are taxed as ordinary income and could push you into a higher income bracket, which means you’ll owe more money in taxes.
Medicare doesn’t kick in
Don’t forget about health insurance. Medicare doesn’t kick in until 65, and while your company has agreed to cover your medical expenses for six months, there will be two-and-a-half years where you have to pay for it, and that isn’t cheap.
Even with Medicare, healthcare in retirement is pricey. In 2025, Fidelity Investments pegs the out-of-pocket costs at $172,500 for a 65-year-old. That too is an expense that needs to be added to your budget for you and your wife.
“You have to really pin down what your lifestyle expenses are really going to be,” says Abigail Gunderson, a senior wealth advisor at Tanglewood Total Wealth Management. “One thing I see, whether it’s with my clients or my own family, is when people retire, typically in the first five to ten years, they spend time traveling, and that’s not cheap. That’s part of the lifestyle.”
Once you figure out realistically how much your lifestyle is going to cost, you can determine on your own or with a financial adviser if your $4 million will be enough to last thirty years.
With $4 million, a traditional 3.5% to 4% withdrawal rate provides $140,000 to $160,000 a year before taxes. Is that enough money to sustain your lifestyle?
If you answer yes, then the buyout is an option. If you answer no, you may want to continue working a little longer or find ways to reduce your expenses to make it work. “In a situation like this, it’s really helpful to hire a wealth adviser,” says Bruno.
The emotional side of the decision
Beyond the finances, accepting the buyout before you’re ready to retire probably means you haven’t fine-tuned your plan for what you will do once you stop working.
For many people, work brings purpose, social connections and routine. Since you love your job, leaving it behind may cause some emotional distress.
Ask yourself what you will do with your free time, and whether you will be OK leaving your work family behind. Do you have a plan for staying connected with your work friends and developing new ways to stay social?
Moreover, your wife may not be ready for you to be home all the time. That’s why it’s important to discuss the buyout with her. It’s not a “you only” commitment; it’s a “both of you” decision.
Take your time with the decision
You probably don’t have too long to decide if the buyout is for you, but the decision also doesn’t have to be made overnight.
It’s important to think long and hard about the buyout, seek professional help, talk to your family and consider all the scenarios — the good, bad and ugly.
“It’s a major life decision that requires thought. Retirement is a big transition financially and from a mental standpoint,” says Bruno. “Look at all your options and make sure you are comfortable with the outcome.”
