What should I check before accepting an early retirement buyout or severance?

Taxes: severance is wages, subject to income tax, Social Security and Medicare tax. Employers often withhold federal income tax at the flat 22% supplemental rate in 2026 (37% on supplemental wages over $1 million in a year). Withholding is not your final tax. A $100,000 payment on top of a full year's salary can push part of your income into a higher bracket, so the amount owed in April can differ from what was withheld.

Health coverage: COBRA lets you keep the employer plan, usually for up to 18 months, and the plan can charge up to 102% of the full cost, including the share your employer used to pay. You have 60 days to elect it. If you leave more than 18 months before you qualify for Medicare, COBRA will not cover the whole gap, so the rest has to be filled another way.

Time to decide: if the agreement asks you to waive age discrimination claims and you are 40 or older, federal rules require at least 21 days to consider it (45 days when the offer is part of a group program), at least 7 days to revoke after signing, and written advice to consult an attorney. Group programs must also disclose the job titles and ages of who was selected and who was not.

Unemployment: each state runs its own program and sets its own eligibility rules. Whether a voluntary buyout counts as a qualifying separation depends on your state, so check before you sign.

What the headline number hides: lost years of pension accrual, employer retirement contributions, and the earlier date your savings start paying the bills. Ask the plan for a written estimate of your pension at the buyout date and at your planned date, and compare the difference to the offer.