Atlanta Business Chronicle Feature: Is Early Retirement The Right Plan For You?


Atlanta Business Chronicle Feature: Is Early Retirement The Right Plan For You?



Atlanta Business Chronicle recently featured Wes Moss among other advisors in an article exploring many factors that play a role in determining if early retirement is the right plan.

Retiring early is a career goal for many executives. But since the Covid-19 pandemic hit, many executives are facing the choice of whether to accept an “early retirement” package. Companies such as Delta Air Lines Inc., The Coca-Cola Company and others have begun offering voluntary workforce reductions in lieu of involuntary layoffs. 

Early retirement packages are traditionally reserved for employees who have significant tenure with the company, according to Wes Moss, Certified Financial Planner, CFP®, chief investment strategist, managing partner and senior investment advisor for Capital Investment Advisors. 

“Usually an early retirement package offers to pull forward someone’s planned retirement date,” Moss said. “Instead of retiring at age 65, a company may offer a package that is worth an entire year’s compensation [including] severance, a healthcare account, early access to a pension if they agree to retire several years before schedule.” 

Even in non-pandemic times, companies examine how to reduce costs. Often, the primary costs are salaries and employee benefits, Moss said. Early retirement packages, then, help corporations take a slightly larger financial hit up front to save them significant costs over time. 

“As we have seen in multiple industries — airlines, retail, telecom, and even the beverage industry — the economic slowdown caused by the pandemic has pushed corporations even further into downsizing their cost structure. Unfortunately, that often means either layoffs or early retirement incentives,” Moss added. 

Frequently, with such packages, a lump sum is offered to buy out someone’s monthly pension amount. To determine if the package is viable, Moss uses what he called the “6% test:” Take the monthly pension offer multiplied by 12, then divided by the lump sum offer. This is the annual percentage rate, Moss explained. 

“If that annual percentage rate for the monthly pension is 6 percent or more, then it is worth considering,” he advised. “If the annual percentage rate of the monthly pension relative to the lump sum is 6 percent or less, then it is typically better to take the lump sum versus the monthly amount.” 

In today’s environment, however, electing to retire early may be the safest financial move given the options, according to Moss. 

“In many cases, taking an early retirement package is simply the lesser of two evils,” Moss said. “[It is] some compensation to leave today versus being laid off with no compensation tomorrow.” 

Read the full Atlanta Business Chronicle article here.

This is provided as a resource for informational purposes and is not to be viewed as investment advice or recommendations.  This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular company.  Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved.  The information provided is strictly an opinion and for informational purposes only and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.  Investment decisions should not be made solely based on information contained herein.


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