Are there tax implications by choosing one over the other? Does that affect how you can apply for unemployment? Can’t understand why someone wouldn’t just want to get the entire severance amount in one large deposit. Thanks.
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I opted for the lump sum just in case the bank either goes under, merged/bought by another bank, or finds some legal loophole to stop paying out severance checks.
Always interesting when a bank employee doesn't understand the concept of time value of money...
maybe talk to a tax accountant if your worried about taxes. really only makes a difference if the lump sum would put you into a new tax bracket for the year and if your severance period stradles two years. for me I was laid off early this year and severance would have lasted until the end of the year, I kept by weekly payments because I needed health benefits, but the day I started my new job I submitted a lump sum request.
Someone who is debt free may want it now to try to draw interest off those funds. Think 6 month CD for example. Or people who do "bank churning" may want the $ now to get more from a bonus offer.
I took lump sum, as I lucked out and used my network to land a job within the 60 days. Didn’t need benefits as the wife is a state employee. Didn’t really do much on the tax front, so worked out.
Take lump sum if you don’t need the benefits, if you have high interest debts to pay off, or if you want the cash in hand with no ongoing obligations that could reduce the severance- like non competes or violations of code of conduct, or whatever else they may put in the severance agreement.
Health insurance is the main reason.
Also some people are just more responsible with small amounts of money coming in regularly than they would be with a big chunk of money burning a hole in their pocket.
If your severance spans more than one tax year, a lump sum could put you in a higher tax bracket and may be better to divide it into 2 years instead. Also benefits continue until you take the lump sum or severance ends including health and life insurance so it depends on the circumstances.
Lump sum if you got another job waiting. (Get the $ and run) regular pmts if you don’t and need med insurance etc…