You’ve put in the years. You’re finally on the doorstep of retirement benefits. Then your boss calls you in and says you’re out — three months before the finish line.
To soften the blow, the company offers you six months of severance pay. The catch? You’ll need to sign away your right to sue. That’s not just a bad day at the office; it’s practically a financial ambush.
Because the real question isn’t whether you can survive for half a year on a severance check. It’s whether walking away means leaving hundreds of thousands of dollars in current and future retirement benefits on the table.
Getting laid off before you qualify for retirement benefits is both a giant inconvenience and a huge reshaping of your financial future. If you were due a pension, missing the vesting date could wipe out a lifetime monthly check. If your company matched your 401(k) contributions, you could lose years of accumulated matches if they aren’t vested yet. And if your job came with stock options or restricted shares, those can vanish overnight when your employment ends.
Health care is another landmine. Most companies cut off your coverage with your job, and continuation coverage through COBRA isn’t cheap.
Fidelity estimates that individual COBRA coverage routinely tops $700 per month, with family rates rising to more than $2,000 a month. If you were counting on subsidized retiree health coverage, being pushed out early could saddle you with considerable costs.
In short, the stakes go well beyond six months of salary. Your retirement security is also at risk.
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Here’s the gray area: Under federal law — specifically the Employee Retirement Income Security Act (ERISA) — employers can’t fire you solely to block you from collecting retirement benefits. On paper, that should protect workers. In practice, it’s murky.
Companies can often frame layoffs as restructuring, cost-cutting or a “business necessity.” Unless you have hard evidence that your firing was designed to cheat you out of retirement, proving intent is difficult.
