Author: Natalie Pine
If your university has offered you a Voluntary Separation Package (VSP), you have a lot to consider. As a firm specializing in helping professors and higher education administrators, we have helped many people navigate these early retirement decisions. We’ve created the following checklist so you can get prepared and avoid common mistakes.
Our best piece of advice? Get organized, then focus on tax planning. Some strategies can help you stretch your payout further, but these require time to put in place. (These strategies were discussed in our previous article.)
VSP Preparation Checklist
- Build a life-after-retirement plan. Retirement can pack an emotional punch if you’re not prepared. Having a plan in place can make the transition a smooth one. Map out any contract lecturing, consulting, and even your social and physical activities, so you’re happily anticipating your last day when it arrives.
- Plan your budget. You’ll need to plan for the change in income. Chart out what you'll have coming in short-term and after your VSP ends. Then, map out your expenses to ensure your budget stays on track. You’ll want to plan for times when your income may be variable.
- Confirm health insurance. Some employers allow you to keep university coverage for you and possibly your spouse for an extra cost. Depending upon your age, you might qualify for retiree coverage on the plan, which allows you to lock in ongoing coverage.
- Update your financial plan. Work with your financial planner (or ideally, one specialized in helping university professionals) to update your plan for your upcoming life changes. You may need to adjust your risk on your investments, for example, or increase your emergency fund.
- Stretch your payout with tax planning. Your biggest opportunity is tax planning. Tax planning can save you money, making your payout go further. Remember, any dollar saved in taxes goes straight into your pocket, boosting your future reserves. Work with a specialist firm such as Briaud, or contact your tax professional and financial planner for help in maximizing your payout. Strategies can include bumping up your retirement plan contributions based on plan and tax law regulations or structuring your payout to delay some of the income.
Bottom line, you’ve got one shot to do this right. Too many people don’t get professional advice, then leave money on the table. Take your time, do your research, and you can be rewarded with more financial security now and down the road.
