As someone who literally wrote the book on how to negotiate a severance package, I love severance case studies! The second rule of FIRE (Financial Independence Retire Early) is simple: never quit your job—always try to negotiate a severance. If you’re planning to leave anyway, why not attempt to create a win-win scenario and walk away with a financial cushion?
Both my wife and I successfully negotiated severance packages in 2012 and 2015, which allowed us to retire early, write, and raise a family. We haven’t returned to full-time work since.
Now, in a major development, the Trump administration is offering severance packages to all federal employees who voluntarily leave by February 6, 2025. The goal? To rapidly shrink the U.S. government and cut costs.
A memo from the Office of Personnel Management, the government’s HR agency, also states that all federal employees will soon be subject to “enhanced standards of suitability and conduct” and hints at further downsizing.
When I first heard about the offer—eight months of severance pay and benefits—my immediate reaction was simple: take it! Take the free money and change your life for the better! But let’s be a little more scientific in our decision making.
How To Determine Whether To Take The Severance Package
If your employer is voluntarily offering you a severance package—and you’ve been thinking about quitting—this is a golden opportunity. You should strongly consider taking the offer, but also try to negotiate for more since the discussion about layoffs is already on the table.
For those undecided, here’s a simple way to assess whether accepting the severance makes sense.
The Basic Severance Barometer
Severance packages typically range from one to three weeks of pay per year worked. To determine if the offer is favorable:
- Calculate what your severance would be based on the number of years you’ve worked.
- Compare it to the actual offer.
- If the severance package exceeds what you’d normally receive for your tenure, it’s a strong sign to take it.
Applying This to the Federal Government Offer
The latest federal government severance package offers eight months of pay, which is about 33 weeks. Based on typical severance calculations, this package is equivalent to someone with 11 to 33 years of experience receiving a severance. Let’s take the midpoint—22 years—as a benchmark.
- If you’ve worked less than 22 years, the deal is better than standard, and you should take it.
- The fewer years you’ve worked, the better the deal becomes.
According to Pew Research Center, the average federal government employee tenure is 11.8 years. This means the majority of federal employees should take the severance package, as they are receiving a much higher payout than what they’d typically be entitled to.
Again, a severance package is free money for not having to do any work.
Other Considerations Before Accepting The Severance Package
If you love your job or have worked in the federal government for more than 22 years, you may hesitate to accept the eight-month severance package. Additionally, if you’re unsure about finding another comparable-paying job before the severance runs out, rejecting the offer may seem like the safer choice. In such cases, it’s reasonable to stay put and hope future layoffs don’t impact you.
That said, from my experience, the first round of layoffs often provides the best severance packages. As layoffs progress through multiple rounds, the employer’s focus shifts from reducing headcount quickly to fine-tuning workforce numbers, which often leads to less generous offers down the road. After all, most of the cost savings is already done.
Rejecting The Severance Package Means More Work
If you decide the severance package isn’t good enough, be prepared to work harder for your money.
- Increased Workload – With thousands of colleagues taking the severance, those who remain will have to pick up the slack.
- Culture Shift – The Department of Government Efficiency is now being led by Elon Musk, bringing a shift from a secure, cushy job to a ruthlessly competitive environment.
Here’s an excerpt from what was e-mailed to over two million federal employees.
The reformed federal workforce will be built around four pillars:
1) Return to Office: The substantial majority of federal employees who have been working remotely since Covid will be required to return to their physical offices five days a week. Going forward, we also expect our physical offices to undergo meaningful consolidation and divestitures, potentially resulting in physical office relocations for a number of federal workers.
2) Performance culture: The federal workforce should be comprised of the best America has to offer. We will insist on excellence at every level — our performance standards will be updated to reward and promote those that exceed expectations and address in a fair and open way those who do not meet the high standards which the taxpayers of this country have a right to demand.
3) More streamlined and flexible workforce: While a few agencies and even branches of the military are likely to see increases in the size of their workforce, the majority of federal agencies are likely to be downsized through restructurings, realignments, and reductions in force. These actions are likely to include the use of furloughs and the reclassification to at-will status for a substantial number of federal employees.
4) Enhanced standards of conduct: The federal workforce should be comprised of employees who are reliable, loyal, trustworthy, and who strive for excellence in their daily work. Employees will be subject to enhanced standards of suitability and conduct as we move forward. Employees who engage in unlawful behavior or other misconduct will be prioritized for appropriate investigation and discipline, including termination.
Getting Paid To Work From Home Was Amazing—Now It’s Gone
One of the best life and money hacks is working for a company that lets you work from home while investing in companies that force employees to be in the office five days a week. The idea is to enjoy life while investing in people who enjoy life less because they’re working more to boost company profits.
Working from home offered a superior lifestyle—no commute, more flexibility, and the ability to spend more time with family. During the pandemic, I saw firsthand how great it was—tennis and pickleball courts were packed on weekdays with remote workers enjoying their newfound freedom.
Life was so good that I even considered getting a full-time job just to get paid to have fun! But securing a role at Google, Meta, or similar companies wasn’t easy. And eventually, they reversed course, implementing mass layoffs and forcing employees back into the office three days a week.
Now, for federal employees, the shift is even more drastic—going from full-time remote work to five days a week in the office. The quality of life hit will be significant. If you’ve worked for the federal government for less than 11 years, I’d strongly consider taking the severance package.
Assess Your Abilities Before Leaving Your Job
The more confidence you have in your ability to make money, the more inclined you should be to take the severance package. If your skills are highly transferable, or if you already have job offers lined up, taking the severance makes sense. There’s nothing better than getting a severance package while immediately landing a new job—that’s the ultimate double dip, which I discuss in How To Engineer Your Layoff.
On the other hand, if you know you’ve been getting paid more than you’re worth, then it may be smarter to stay put. Keep collecting your paycheck while quietly looking for another job. If you’re a significant underperformer, the Department of Government Efficiency (DOGE) might eventually let you go without any severance. So start taking action immediately to protect yourself.
Consider the Impact on Your Pension
Also, think carefully about how leaving your job will affect your pension in the future. Your pension is likely far more valuable than you realize. If you’re close to qualifying for a pension or on the verge of a pension pay bump, it may be worth staying and grinding it out a little longer.
In many cases, just a few more years of service can result in a significantly higher payout for life. So before accepting a severance package, run the numbers and weigh the long-term financial impact of walking away.
Having A Day Job With Benefits Is Amazing
After 16 years running Financial Samurai and another 16 years working traditional jobs, I have a clear perspective on what it takes to succeed in both. Both require hard work, but entrepreneurship is relentless—there are no days off if you want to survive and grow.
In retrospect, having a steady paycheck with healthcare and a pension is a luxury, especially if you have a family to provide for. A day job is like snuggling in a warm nest with a thick, furry blanket and a cup of hot chocolate. Meanwhile, entrepreneurship often feels like a sink-or-swim battle for survival.
As an entrepreneur, you literally need to earn 30% – 60% more just to match the take-home pay of a steady job. There’s no pension unless you fund one yourself. On top of that, you’re on the hook for double the FICA tax.
As you can see below, the financial burden of self-employment is much higher than most people realize.
So if you don’t have the mindset to hustle relentlessly, or you are too uncomfortable with uncertainty, the decision to take the severance package becomes trickier. Once you leave your job, especially as you get older, it’s tough to find a similar-paying role again.
The better course of action may be to simply work harder and build better relationships. If you do eventually get laid off, hopefully, the government will also give you a severance package. But there are no guarantees.
I’d Take The Money And Go To The Beach
For the millions of federal government employees being offered a severance package, it’s time to crunch the numbers and do an honest assessment of your abilities.
Personally, as long as I keep my lifetime pension, I’d accept the severance package and explore something new. If I’m eligible for a pension, that means I’ve already worked for the federal government for at least five years. I’ve found that work gets boring after ten years.
I’d use this time off to spend the entire summer with my kids, traveling to exciting new places. At the same time, I’d apply for unemployment benefits and search for other jobs that offer remote work. Plus, I’d work on my side hustle to become less reliant on a day job moving forward.
These voluntary severance packages don’t come around often, so I’d take it! If you’ve managed to secure a federal government job in the first place, you should have the confidence in your ability to land another job down the line. Best of luck!
Reader Questions And Suggestions
Readers, would you take the eight-month severance package offer? Do you think you’d be able to land a similar job with comparable pay within eight months? And why do you think more people don’t accept a free financial gift like this if they’re no longer enjoying their work?
If you want to learn how to negotiate a severance package and break free from a job you dislike, pick up a copy of How to Engineer Your Layoff. Now in its 6th edition, the book has been refined over the past 13 years with fresh strategies and insights. You have more power than you think, especially after reading my book. Use the code “saveten” at checkout to save $10!
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