As someone who literally wrote the book on how to negotiate a severance package<\/a>, I love severance case studies! The second rule of FIRE (Financial Independence Retire Early) is simple: never quit your job\u2014always try to negotiate a severance. If you\u2019re planning to leave anyway, why not attempt to create a win-win scenario and walk away with a financial cushion?<\/p>\n Both my wife and I successfully negotiated severance packages in 2012<\/a> and 2015<\/a>, which allowed us to retire early, write, travel extensively, and raise a family. We haven’t returned to full-time work since.<\/p>\n Now, in a major development, the Trump administration is offering severance packages to all federal employees who voluntarily leave by February 6, 2025. The goal? To rapidly shrink the U.S. government and cut costs.<\/p>\n A memo from the Office of Personnel Management<\/a>, the government\u2019s HR agency, also states that all federal employees will soon be subject to \u201cenhanced standards of suitability and conduct\u201d and hints at further downsizing.<\/p>\n When I first heard about the offer\u2014eight months of severance pay and benefits\u2014my immediate reaction was simple: take it!<\/strong> Take the free money and change your life for the better! <\/p>\n But first, let\u2019s conduct a more analytical approach before deciding. Regardless of whether the buyout package is legal or funded, federal employees must think critically about their futures. The government has revealed its hand\u2014now it\u2019s up to employees to determine their best path forward, no matter the outcome.<\/p>\n <\/p>\n If your employer is voluntarily offering you a severance package\u2014and you’ve been thinking about quitting\u2014this is a golden opportunity. You should strongly consider taking the offer, but also try to negotiate for more since the discussion about layoffs is already on the table.<\/p>\n For those undecided, here\u2019s a simple way to assess whether accepting the severance makes sense.<\/p>\n Severance packages typically range from\u00a0one to three weeks of pay per year worked<\/strong>. To determine if the offer is favorable:<\/p>\n The latest federal government severance package offers\u00a0eight months of pay, which is about\u00a033 weeks. Based on typical severance calculations, this package is equivalent to someone with\u00a011 to 33 years\u00a0of experience receiving a severance. Let\u2019s take the midpoint\u201422 years<\/strong>\u2014as a benchmark.<\/p>\n According to\u00a0Pew Research Center<\/a>, the\u00a0average federal government employee tenure is 11.8 years<\/strong>. This means the\u00a0majority of federal employees should take the severance package, as they are receiving a much higher payout than what they’d typically be entitled to.<\/p>\n Again, a severance package is free money for not having to do any work. <\/p>\n If you love your job or have worked in the federal government for\u00a0more than 22 years, you may hesitate to accept the\u00a0eight-month severance package. Additionally, if you’re unsure about finding another\u00a0comparable-paying job\u00a0before the severance runs out, rejecting the offer may seem like the safer choice. In such cases, it\u2019s reasonable to stay put and\u00a0hope future layoffs don\u2019t impact you.<\/p>\n That said, from my experience,\u00a0the first round of layoffs often provides the best severance packages. As layoffs progress through\u00a0multiple rounds, the employer’s focus shifts from\u00a0reducing headcount quickly\u00a0to\u00a0fine-tuning workforce numbers, which often leads to\u00a0less generous offers\u00a0down the road. After all, most of the cost savings is already done. <\/p>\n If you decide the severance package\u00a0isn\u2019t good enough, be prepared to\u00a0work harder for your money.<\/p>\n Here\u2019s an excerpt from what was\u00a0e-mailed to over two million federal employees. <\/p>\n 1) Return to Office:<\/strong>\u00a0The substantial majority of federal employees who have been working remotely since Covid will be required to return to their physical offices five days a week. Going forward, we also expect our physical offices to undergo meaningful consolidation and divestitures, potentially resulting in physical office relocations for a number of federal workers.<\/p>\n 2) Performance culture:<\/strong>\u00a0The federal workforce should be comprised of the best America has to offer. We will insist on excellence at every level \u2014 our performance standards will be updated to reward and promote those that exceed expectations and address in a fair and open way those who do not meet the high standards which the taxpayers of this country have a right to demand.<\/p>\n 3) More streamlined and flexible workforce:\u00a0<\/strong>While a few agencies and even branches of the military are likely to see increases in the size of their workforce, the majority of federal agencies are likely to be downsized through restructurings, realignments, and reductions in force. These actions are likely to include the use of furloughs and the reclassification to at-will status for a substantial number of federal employees.<\/p>\n 4) Enhanced standards of conduct:\u00a0<\/strong>The federal workforce should be comprised of employees who are reliable, loyal, trustworthy, and who strive for excellence in their daily work. Employees will be subject to enhanced standards of suitability and conduct as we move forward. Employees who engage in unlawful behavior or other misconduct will be prioritized for appropriate investigation and discipline, including termination.<\/p>\n One of the best\u00a0life and money hacks\u00a0is working for a company that lets you\u00a0work from home\u00a0while investing in companies that force employees to be in the office<\/a>\u00a0at least three days a week, e.g. Amazon and JP Morgan. The idea is to enjoy life while investing in people who enjoy life less because they’re working more to boost company profits.<\/p>\n Working from home offered a\u00a0superior lifestyle\u2014no commute, more flexibility, and the ability to\u00a0spend more time with family and friends. During the pandemic, I saw firsthand how great it was\u2014tennis and pickleball courts were\u00a0packed on weekdays\u00a0with remote workers enjoying their newfound freedom.<\/p>\n Life was so good that I even considered\u00a0getting a full-time job just to get paid to have fun! But securing a role at\u00a0Google, Meta, or similar\u00a0companies wasn\u2019t easy. And eventually, they\u00a0reversed course, implementing mass layoffs and forcing employees back into the office\u00a0three days a week. Then their share prices boomed, for other various reasons too.<\/p>\n Now, for federal employees, the shift is even more drastic\u2014going from\u00a0full-time remote work\u00a0to\u00a0five days a week in the office. The\u00a0quality of life hit\u00a0will be significant. If you’ve worked for the federal government for\u00a0less than 11 years, I\u2019d strongly consider\u00a0taking the severance package.<\/p>\n The\u00a0more confidence\u00a0you have in your ability to make money, the\u00a0more inclined\u00a0you should be to take the severance package. If your skills are\u00a0highly transferable, or if you already have\u00a0job offers lined up, taking the severance makes sense. There\u2019s nothing better than\u00a0getting a severance package while immediately landing a new job\u2014that\u2019s the ultimate\u00a0double dip, which I discuss in How To Engineer Your Layoff<\/a><\/strong><\/em>.<\/p>\n On the other hand, if you know you\u2019ve been\u00a0getting paid more than you\u2019re worth, then it may be\u00a0smarter to stay put. Keep collecting your paycheck while quietly looking for another job. If you\u2019re a significant\u00a0underperformer, the Department of Government Efficiency (DOGE) might\u00a0eventually let you go without any severance. So start taking action immediately to protect yourself.<\/p>\n Also, think carefully about\u00a0how leaving your job will affect your pension<\/a> in the future. Your pension is likely\u00a0far more valuable than you realize. If you\u2019re\u00a0close to qualifying\u00a0for a pension or on the verge of a\u00a0pension pay bump, it may be\u00a0worth staying and grinding it out\u00a0a little longer.<\/p>\n In many cases,\u00a0just a few more years of service\u00a0can result in a\u00a0significantly higher payout for life. So before accepting a severance package,\u00a0run the numbers\u00a0and\u00a0weigh the long-term financial impact\u00a0of walking away.<\/p>\n Furthermore, I\u2019d wait until the final deadline<\/em><\/strong> to accept or reject the buyout package, as circumstances could change. The last thing you want is to jump at the offer too soon, only to find out later that the government can’t follow through on its payment.<\/p>\n After\u00a016 years running Financial Samurai\u00a0and another\u00a016 years working traditional jobs and consulting, I have a\u00a0clear perspective on what it takes to succeed in both.\u00a0Both require hard work, but\u00a0entrepreneurship is relentless<\/a>\u2014there are\u00a0no days off if you want to survive and grow.<\/p>\n In retrospect, having a\u00a0steady paycheck\u00a0with\u00a0healthcare and a pension\u00a0is a\u00a0luxury, especially if you have a family to provide for. A day job is like\u00a0snuggling in a warm nest\u00a0with a thick, furry blanket and a cup of hot chocolate while it snows outside. Meanwhile, entrepreneurship often feels like a\u00a0sink-or-swim battle in the middle of the rough ocean for survival!<\/p>\n As an entrepreneur, you\u00a0literally need to earn 30% \u2013 60% more\u00a0just to match the take-home pay of a steady job. There\u2019s\u00a0no pension\u00a0unless you fund one yourself. On top of that, you\u2019re\u00a0on the hook for double the FICA tax.<\/p>\n As you can see below,\u00a0the financial burden of self-employment is much higher than most people realize.<\/p>\n So if you\u00a0don\u2019t\u00a0have the mindset to\u00a0hustle relentlessly, or you are too uncomfortable with uncertainty<\/a>, the decision to take the severance package becomes trickier. Once you\u00a0leave your job, especially\u00a0as you get older, it\u2019s\u00a0tough to find a similar-paying role again.<\/p>\n The better course of action may be to simply work harder and build better relationships. If you do eventually get laid off, hopefully, the government will also give you a severance package. But there are no guarantees.<\/p>\n For the millions of federal government employees being offered a severance package, it\u2019s time to crunch the numbers and do an honest assessment of your abilities.<\/p>\n Personally, as long as I keep my lifetime pension, I\u2019d accept the severance package and explore something new. If I\u2019m eligible for a pension, that means I\u2019ve already worked for the federal government for at least five years. Doing the same work gets boring for me after ten years.<\/p>\n I\u2019d use this time off to spend the entire summer with my kids, traveling to exciting new places. At the same time, I\u2019d apply for unemployment benefits and search for other jobs that offer remote work. Plus, I\u2019d work on my side hustle<\/a> to become less reliant on a day job moving forward.<\/p>\n These voluntary severance packages don\u2019t come around often, so I\u2019d take it! If you\u2019ve managed to secure a federal government job in the first place, you should have the confidence in your ability to land another job down the line. Best of luck!<\/p>\n Readers, would you take the eight-month severance package offer? Do you think you’d be able to land a similar job with comparable pay within eight months? And why do you think more people don’t accept a free financial gift like this if they’re no longer enjoying their work?<\/p>\n If you want to learn how to negotiate a severance package and break free from a job you dislike, pick up a copy of\u00a0How to Engineer Your Layoff<\/strong>.<\/a> Now in its 6th edition, the book has been refined over the past 13 years with fresh strategies and insights. You have more power than you think, especially after reading my book. Use the code \u201csaveten\u201d at checkout<\/a><\/strong> to save $10!<\/p>\nHow To Determine Whether To Take The Severance Package<\/h2>\n
The Basic Severance Barometer<\/h3>\n
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Applying This to the Federal Government Offer<\/h3>\n
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Other Considerations Before Accepting The Severance Package<\/h2>\n
Rejecting The Severance Package Means More Work<\/h2>\n
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The reformed federal workforce will be built around\u00a0four pillars:<\/h3>\n
Getting Paid To Work From Home Was Amazing\u2014Now It\u2019s Gone<\/h2>\n
Assess Your Abilities Before Leaving Your Job<\/h2>\n
Consider the Impact on Your Pension<\/h2>\n
Having A Day Job With Benefits Is Amazing<\/h2>\n
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<\/a><\/figure>\nI’d Take The Money And Go To The Beach<\/h2>\n
Reader Questions And Suggestions<\/h2>\n
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