Ugh, we all just got an email detailing severence packages...advice needed.

Misty Posted: Jan 14, 2004 11:29 AM

Ugh, we all just got an email detailing severence packages...advice needed.

The proverbial 'what if' email. Telling us what we get in case we are canned.

Does anyone know if it's better to take a severence package in a lump sum or installments? Is one more heavily taxed than the other?

OctBride03 Posted: Jan 14, 2004 11:33 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Sorry to hear this Misty... I'm not sure of the tax reasons, but when I got laid off 3 years ago, I took my severance in weekly payments. It still felt like I was getting a paycheck and it didn't make me worry so much, since I had money coming in weekly. Of course it runs out, but the same taxes were taken out as if I were working. Don't know if I make sense, just my personal choice.

Hope everything turns out ok for you

ChristineC68 Posted: Jan 14, 2004 11:36 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Most payroll companies can 'spread out' the income so that when you receive a lump sum like that you don't get taxed as if that was your regular salary.

I am not sure, but I don't think you can collect unemployment if you are receiving your severance package in installments.

IMO it would probably be easier for budgeting purposes to receive the income in stallments but if the future of the company was in jeopardy, I would take the lump sum.

I am sorry you are in this situation

Lisa Rose Posted: Jan 14, 2004 11:37 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

when I got laid off...I didnt get a choice on how i wanted my severence...its was in one lump sum!!

Keep your chin up...maybe it wont affect you!

Misty Posted: Jan 14, 2004 11:43 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Thanks ladies. Fingers crossed!

deby Posted: Jan 14, 2004 11:46 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Most likely - depending on your tax bracket now and the amount of the lump sum verses the installment- if you opt for a lump sum, you will end up with less money in the short run (they will take out a greater percentage of taxes from you check). But when you file your tax return for 2003, you will get back the difference and it will equal out.

This is generally advice. You should contact your accountant for your particular situation.

HappyEverAfter Posted: Jan 14, 2004 11:48 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

When I got laid off, I took my severence in a lump sum as the company was very shaky, and I was afraid that they would not be able to pay out the full amount if they did it in installments. I would ask your accountant about tax implications if you have a choice.

shelzyp Posted: Jan 14, 2004 11:51 AM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

THye will withold more, but you will get the excess witholding at the end of the year. All in all the taxes paid will equal the same.

Jenn P Posted: Jan 14, 2004 12:24 PM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Shelzyp and Deby are correct. This is what I always try to explain to DH when he works a lot of overtime or gets a bonus and then becomes upset when he gets nailed in the subsequent paycheck.

I would take Christine's point as the most important-is the company's future in doubt? If it is, anyone promised severance will be the last in line, if you're in line at all, to receive anything should they close their doors. I say take it and run.

yabbobay Posted: Jan 14, 2004 12:44 PM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

DH didn't have a choice either...but we deposited it right away and modified our living to my salary and his unemployment (don't let anyone convince you that b/c you got a severance that you shouldn't morally apply for unemployment until your severance is up - you paid into the unemployment system...you diserve to get it back!)

we didn't touch the severance...which worked out as a nice little savings for us when we moved out of NY

ChristineC68 Posted: Jan 14, 2004 12:58 PM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

Posted by yabbobay

(don't let anyone convince you that b/c you got a severance that you shouldn't morally apply for unemployment until your severance is up - you paid into the unemployment system...you diserve to get it back!)

I don't think it's morally wrong to apply for unemployment when you get a severance. I am not sure if you are allowed to apply for it while you are still receiving a form of compensation from your previous employer.

steph4777 Posted: Jan 14, 2004 01:13 PM

Re: Ugh, we all just got an email detailing severence packages...advice needed.

There is nothing wrong with collecting unemployment with severance. I did it in June when i got laid off. I collected severence payments twice a month until end of Sept. I also got an unemployment check every two weeks. Luckily I found a job while I was still collecting my severance.

The job market is tough and I took a pay cut and don't have receive as many benefits as I used to (vacation, 401K matching, ESOP, Stock options). I was able to save a lot of money.