What are the pros / cons of taking a lump sum payout for severance? It would be the max 12 months.
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I took the lump sum just to be done with WF. I believe the money gets taxed at the same rate whether lump sum or regular payments. The only thing that su-ks is that my benefits end the same month I got my lump sum severance rather than dragging on for the next several months. If I want medical benefits at this point it would be at the cobra rates. If you are already on a spouses plan then it’s no big deal.
Unless I'm literally dying I don't think there's any circumstances where I would take a lump sum. Payments and benefits are better in a very large number of plausible situations. If your plan is to invest it all, I'd still want it spaced out some to DCA it into the market.
Pro: completely sever your WF relationship
Con: if you take a lump sum and let’s say it’s for 12 months but you get another job at WF let’s say at month 7 you have to pay them back the 5 months of money.
One thing that is worth mentioning is that your employment immediately ends when you take the lump sum. If you plan to look for jobs with WF in the future, you have 6 months from that date to be hired to keep your years in, mainly pto. If you take the biweekly payments, not only do you keep wf insurance instead of cobra, believe the 6 month return clock starts once severance has run out. Also, if you take a lump sum and return within what would have been your severance period, you have to repay the remaining amount. If you have an HSA, no worries, that goes with you. If you have an HRA though, I think you can use that while you are s
You get a chunk of money in hand all at once, you get taxed on that huge lump, whatever is left you can invest or spend immediately.
Instead of 12 months of company benefits, you immediately get dumped on COBRA where you'll pay $900- $1000 a month just to keep your medical coverage going (more of you cover dependents). Be careful.
Pros:
Immediate influx of money.
Trade funds/stocks with new money
Use money to buy car/boat/home etc.
Cons:
Loss of health insurance
Potentially more taxes if bracket changes
Money influx gets spent on cruises/holiday vacation
If you’re talking strictly financial - time value of money. You could earn 10% on that money in an index fund over a year.