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BookWatch: Thinking of retiring early? The ‘Financial Samurai’ tells you how to jumpstart your FIRE life by negotiating a fat payoff

Quit your job or be laid off? Most would choose the former, especially in a strong job market. Actually, being laid off is better.  

In a layoff, you might receive a severance package. You’ll also be eligible for unemployment benefits, often lasting for up to 26 weeks, depending on the state where you live. You might even receive subsidized healthcare insurance for several months after you leave.

If you quit your job to retire early, you’ll receive no benefits. Instead, you might burn bridges because you left your employer and colleagues scrambling with little notice. 

In 2009, I helped start the modern-day FIRE movement by founding Financial Samurai, writing about how to retire early so you can do what you want. Three years later, I was able to leave a job in banking for one major reason: a severance package that paid for six years of living expenses. 

In the banking world, some of your compensation is paid in deferred cash and stock. It’s that industry’s version of golden handcuffs. When I was burning out in 2012, I had three years of deferred compensation and shares in a private investment I would lose if I had quit. Thanks to the severance package, I walked away with it all. 

For those without a pension, severance is like creating your own pension. The money is a buffer during your transition from the working world, which can be more jolting than expected. And you don’t need to work in finance, like I did, to negotiate a severance package. What you do need is to be a thoughtful employee.

Exit strategy

Let’s say you’ve been at your company for eight years and have decided that the work no longer interest you. You are burned out and have had enough of corporate life. At age 42, with a net worth equal to 15 times your average annual pay, you’ve decided to retire early and be free. 

The trouble is that if you quit, you would forfeit three years’ worth of deferred stock compensation, equal to about $200,000. Further, you won’t get any severance pay or be eligible for unemployment benefits because you quit. The logic goes that if you quit your job, it must mean you don’t need the money. Otherwise, you wouldn’t quit. 

Instead, try to get a severance package. Here’s what to do:

1. Look up WARN notifications for your company in the state where you live: “WARN” stands for “Worker Adjustment and Retraining Notification,”  where a company legally must file with the state if they plan to do a mass layoff. 

The goal is to provide potentially laid-off workers time to adjust to a job loss. WARN Act pay can provide you with between one- and three months of your salary as required by law if you are part of a mass layoff. 

Don’t confuse a severance with WARN Act pay. WARN Act pay is mandatory if a firm meets the requirements. Paying a severance is discretionary and often is added on top of WARN Act pay. 

If your company has filed a WARN notification, then you should expect upcoming layoffs. Your goal then is to proactively volunteer to be laid off. You’ll save a colleague’s job and be in a better position to negotiate a greater severance package for yourself than if the decision to lay you off has already been made.

If your company did not file a WARN notification or is a smaller company that isn’t required to file, it’s still up to you to initiate the conversation about moving on. 

2. Have an honest talk with your manager or HR head: One of the toughest things a manager can do is lay someone off. By volunteering to be laid off, you save your manager a tremendous amount of angst — and give yourself the ability to negotiate the terms of your layoff. 

Begin the severance negotiation dialogue with your manager by taking them for coffee or lunch. During this friendly get-together, inquire about staffing levels and how the business is going overall. 

You then start hinting that your heart is no longer in your job. You can mention that you are willing to sacrifice your position for the greater good of the firm. You’re willing to stay on board for as long as it takes to find your replacement and train them to ensure a smooth transition. In exchange, you would like to receive a severance package based on your years of good service. 

Being a manager is extremely difficult during rough times. If you can help make some difficult decisions for managers, more often than not they will accept your proposal and help you get the severance you want. 

Of course, if you are one of the top performers, you might face more resistance. However, once your manager knows you’re serious, the rational move is to find a hungry replacement and let you go with severance. 

For example, my wife was a high-performing employee at her previous job. After 11 years, she negotiated a hybrid severance package where the firm allowed her to get full pay while working only three days a week for four months. She was able to help with hiring replacements for her role and ensure they were fully trained and up to speed for a smooth exit. After four months, she then received three months of severance pay and got unemployment benefits.

As long as you’re thinking about your company’s needs, you boost your chances of negotiating a severance. 

3. Push a little harder if you’re getting resistance: Let’s say your manager doesn’t initially agree to your severance package request. That’s OK. If you’re on good terms, consider asking for a sabbatical. Sabbatical policies usually allow employees to take one- to three months off after a certain amount of years of service. 

Asking for a sabbatical after getting a cold reception to a severance package gets a manager thinking. If they are going to lose your productivity for months on sabbatical anyway, then maybe letting you go with a severance might be best. After all, once you return from your sabbatical, there’s no guarantee you will continue to work hard at a job you’ve already revealed no longer interests you.

If your company doesn’t have a sabbatical policy, consider taking time off based on the Family Medical Leave Act (FMLA). FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. An employee can take up to 12 work weeks of leave in a 12-month period. 

From an employer’s perspective, twelve work weeks of leave is a long time to be without an employee, even if it’s unpaid. As a result, an employer might be more open to negotiating a severance if you highlight your desire for FMLA. The employer might decide to find an amicable arrangement so they can start looking for your replacement.

4. Fade to average to slightly below-average: From a manager’s perspective, it’s easier to lay off mediocre employees rather than rock stars. So you may want to strategically take your skills down a notch at work. With less stress, in fact, you might discover you like your job more. 

Taking things down is risky, and you must manage this tactfully. Companies regularly let go of their bottom 5%-10% performers every year, especially during a recession. Your goal is to not get that low, otherwise, you may lose some of your negotiating leverage. Instead, shoot to be in the bottom 30% to 50%. 

Just make sure not to do anything that could be a reason for dismissal. Again, if you get fired, you become ineligible for a severance and most likely won’t qualify for unemployment benefits. 


A severance package is real money and will help ease your transition. After years of work, retirement might be extremely jolting. There are plenty of negatives about early retirement that are not typically discussed. A severance package can give you a comforting buffer to ease into this new life. 

Negotiating a severance package was my catalyst to take a leap of faith at age 34 in 2012. After a year of international travel, I got bored. So I decided to consult for some financial technology startups in San Francisco. In addition to consulting, I continued to write on Financial Samurai. By the time my deferred compensation was fully paid out five years later in 2017, Financial Samurai was generating a livable income.

Thanks to that severance package, I’ve been able to better lead my desired lifestyle. If you can make that happen, you’ll feel like the luckiest person alive. 

Sam Dogen is the author of Buy This, Not That: How to Spend Your Way to Wealth and Freedom (Portfolio, 2022). He founded Financial Samurai in 2009 to help people achieve financial freedom sooner. Dogen spent 13 years working in investment banking and retired at age 34.

More: How this 38-year-old made it from ‘deep poverty’ to millionaire

Plus: Sam Dogen: These are the bad things about early retirement that no one talks about

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