“Should I Take A Redundancy?”
I have been working for the same company for 30 years and have been offered a redundancy package equivalent to two years’ pay. I am inclined to accept it, take a break from working for a while and then look for part-time work. I am single and a bit nervous that I could be making a mistake.
Lisa, 53, Stirling, WA
This is tricky and when we face tricky decisions, we often default to a binary choice: do I take option A or option B? Instead, you’re likely to make a better decision if you consider all the potential options available to you.
A redundancy with two years’ pay is a very attractive offer and a nice boost to your bottom line. If you accept it, you have two challenges: how do you use the lump sum wisely, and how can you ensure you have sustainable employment and income in the future?
The big risk is that after your break from working, it may take longer than you expect to secure a new role and you could whittle away your redundancy money. So it’s important to balance the lifestyle and health benefits of taking a break now with the benefits of work continuity, given that, at 53, you still have at least 12 years until retirement age.
This matters because one of the most important factors in retirement planning is having a sustainable income stream that you can live off without dipping into your current savings.
Ask yourself what the likelihood is of securing a new role after your break? We hear stories about ageism in the workforce, and I would caution against being out of the workforce for an extended time.
You could secure a new part-time or full-time role immediately and negotiate either a delayed starting date or arrange for extended leave in future? Do it on your terms: think about what could help you feel like you’re having a break while still maintaining continuity of employment.
If you do opt to take the redundancy, set aside some of the money as a cash buffer, ideally about six months’ worth of expenses. The rest of the money should be invested and, in that case, topping up your super is the smart choice.
By Kate McCallum, financial adviser and author of The Joy of Money; multiforte.com.au
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