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, travel extensively, 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 first, let’s conduct a more analytical approach before deciding. Regardless of whether the buyout package is legal or funded, federal employees must think critically about their futures. The government has revealed its hand—now it’s up to employees to determine their best path forward, no matter the outcome.
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 at least three days a week, e.g. Amazon and JP Morgan. 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 and friends. 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. Then their share prices boomed, for other various reasons too.
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.
Furthermore, I’d wait until the final deadline to accept or reject the buyout package, as circumstances could change. The last thing you want is to jump at the offer too soon, only to find out later that the government can't follow through on its payment.
Having A Day Job With Benefits Is Amazing
After 16 years running Financial Samurai and another 16 years working traditional jobs and consulting, 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 while it snows outside. Meanwhile, entrepreneurship often feels like a sink-or-swim battle in the middle of the rough ocean 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. Doing the same work gets boring for me 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!
To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.
This offer truly would be a blessing to my family if the payout of the severance package happens. We have a 10month old that will be starting daycare next week and but if we can take this offer we could extend caring for our baby at home until he is 18mos old! We’re sorta in a pickle since my husband has only 4months in his position so he would be first to be let go if there are reductions in force. He really wants to take the severance but I’m nervous about not having guaranteed income. What would you do in this situation?
I find this whole situation fascinating. Will the offer hold true or will it not? How many people will be tempted to take the offer but decline out of fear vs how many will jump at the opportunity etc?
There are so many possible outcomes and I think you laid out a very logical and wise approach to considering the terms. Whatever ends up happening, I think it is always great to be as prepared as possible so that one can make as best an optimal decision as possible. I will be closely watching this unfold and wish the affected employees all the best in navigating such an unusual circumstance for the government.
Considering how often trump has stiffed his own contractors and businesses in the past, I’d be very wary of this offer, considering its legality and funding questionability.
The legality of the offer is questionable. However, if I were planning to retire this fall/winter or in January 2026, I would look at the offer hard. To me it is a heads I win, tails you lose proposition for folks in that specific situation. I don’t have to worry. My agency got itself exempted so taking it is not an option for me.
I work for the federal, in Canada. The conservatives will take power and I’m 7 years away from retirement. If they make me an offer, you betcha I’ll take it !
The culture they are aspiring to create and hoping will follow things like Tesla and Google are missing one main component, high pay. People are willing to grind at those jobs and they attract talent based on interesting projects yes, but also six figure and up pay. The average government worker makes under 6 figures. The competitive advantage the government offered to compensate for this was flexible working situations. Expecting private level work ethic at public level pay will never work the way they want. They’ll simply lose the most marketable and valuable employees and either deal with vacancies or whoever they can get to do the job, no matter the quality. And I agree with most others, he can promise anything he wants but comes controls the money and the law no matter how much he wishes it wasn’t so. No one in their right mind should take the layoff offer.
Excellent point Db about lower pay and a lack of upside for raises. So logically, that should change too, with more performance-based incentives.
The one thing federal government employees do have are valuable pensions though. And that’s a nice equalizer, especially for lifetime security, if the employees can work long enough and earn a substantial pension.
But now I wonder whether the pensions will continue to be cut under this new administration. I doubt it, as there would be a huge revolt.
I would wait until the deadline to take the offer if you want it, b/c anything can change between now and then.
It will take some time but pensions will eventually be frozen then eliminated. New employees will get the option of a bigger contribution than currently allowed.
I’m not sure the defined benefit, non-contributory plans exist any longer and so a lucrative pension may not be the glue holding employees to their career. Federal workers I associated with valued their jobs for the flexibility and generous time off, not for the pensions.
Pensions definitely aren’t what they used to be. But it still is valuable if you got one.
DB, I agree with you. I believe what he has put out there…not trustworthy, insensitive, bully, and selfish…I don’t trust “anything” he says…8 mths of pay to sit home…makes no sense in this case. We are “not” talking about 1 or 2 employees but thousands…what is the point of them getting the package and sitting at home? What about the work load…will they actually get paid?
Like previous posters, I don’t believe the offer is legal. The President does not have the legal authority to offer 8 months of pay and salaries are funded by the respective gov’t agencies, not OPM. Also, the gov’t is only funded through 3/14 – NOT September.
The thing is, federal government employees must now think and act strategically. It’s free to do to be prepared for whatever may happen.
The biggest fear employees have is bringing up the topic of getting a severance package. Now that it’s open, there’s no greater time to negotiate one!
I’d wait until the final deadline to accept or reject the buyout package, as circumstances could change. The last thing you want is to jump at the offer too soon, only to find out later that the government can’t follow through on its payment.
Negotiating a severance package with Trump and Musk? I doubt it. In the end, we’ll likely have only two choices: resign voluntarily or be forced out.
Most employees feel powerless to negotiate until they learn they do have power, protection, and means. This is how employers can take advantage of employees with asymmetric information.
I’ve seen both sides of the negotiating table. And of course, employees are free to quit with nothing if they want. That’s the beauty of living in a free country. We are all rational in the end.
The “buyout” is not legal, nor is it funded. Why bother considering a nonsense offer?
Next, the enhanced standards of conduct mean showing fealty to the FFOTUS (First Felon Of the United States). That is not part of the standards of conduct for any civil servant.
What Elump is attempting to do might work in the business world, but not in government.
Because it’s always good to plan ahead and think about your best course of action when things are presented. The federal government has shown them their cards, now it’s up to you to navigate appropriately, including negotiations.
Employees have more negotiating leverage than they realize.
Are you a federal government employee?
I was a government employee for 30 years and in management for 20. There is no way to negotiate anything for the majority of the employees. There is no leverage.
Sounds like a good run!
In your experience, was it a “take it and like it” type of iron fist ruling? If so, what department were you in and did you leave with a severance or just voluntarily retire with your pension? When did you leave?
Times, they are a changing with the new administration. And the pandemic also change so much about work. I would have loved to have gotten paid to work from home from 2020 – 2024. Those were formidable years for my children.
No, but I worked with civil servants for decades and now, in retirement, know several including relatives.
“…would you take the eight-month severance package offer?”
If it was guaranteed to be paid out, however there are quite a few articles around that indicate that this particular payout isn’t.
Picking one at random, it says:
But it now that the government has revealed its hand and what it wants, the employees have the advantage now. They can mentally decide whether to take or not when the deadline comes (Wait until the end), and pivot if things change.
Everything is negotiable. And how employees, at the moment, know what the floor is. Smart employees who want out will start having open dialogues and cut side deals.
Keep things fluid folks!
Apparently the offer is not a legal one and was not authorized by congress.
I’d love to negotiate a severance. I’m the VP of the business and my wife is the President. Any suggestions?
Kidding aside, I fully agree that this is a fantastic opportunity for a lot of folks. You couldn’t pay me enough to get me in an office 5 days a week. I’m also excited that this is being implemented — I don’t mind folks slacking working for private companies — that’s the company’s problem and not my business. But slacking on the taxpayers dime is another issue, and the amount of job security they’ve had in the past has made slacking even easier. My dad worked road construction for a private company for 40 years. Then he spent his last 10 years of his career at the department of transportation. It was a real eye opener to see how time and money was wasted.
Mike, I would tell your wife to work harder so you can get that severance! Just got to treat her well and make sure the household is taken care of. You can do it!
See this post for strategies: How To Convince Your Spouse To Work Longer So You Can Retire Earlier