Would You Retire for a Buyout?

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The College of Liberal Arts at UT is offering its first ever “buyout.” If a faculty member retires at the end of this semester, s/he receives two years of pay as a lump sum. To be eligible, the sum of age plus years at UT must be at least 93. Of the 88 eligibles, I’m told that over 40 are taking the buyout.

It’s an interesting economic calculation. An easy comparison is the current monetary gain to the lost future earnings (assuming the professor would not be reemployed elsewhere, or at least not at the same pay). The tougher comparison is the likely gain or loss to the utility of the extra leisure — or perhaps the disutility of possibly never teaching again.

I would predict that older people would be more likely to take the buy-out — since the present value of their lost earnings is lower; but the oldest eligible person is 84, and he isn’t taking it because he loves teaching and gets little enjoyment out of his leisure. Chacun a son goût; but if I were eligible (despite being age 67, my mere 18 years at UT renders me ineligible), I would take the buyout in a minute. What would you do? Why?


I would take it, and then use those two years pay to spend two years (or more if I stretch it out) doing something worthwhile.

If this is early on in my life, that would probably involve taking further education, and then returning to the workforce with an even greater value.

If this is later on, I'd probably write a book or look into getting some sort of indie project going. Maybe try my hand at producing an ultra-low budget movie or game.

David Glen

Unless health and dental benefits were included, I would not take it, unless I really hated teaching or I had something better to do. Presumably anyone who has reached the magic number still likes their job. Also, if they have been teaching long enough, their seniority probably assures them of the best (and most convenient) time slots, so the physical problems would not be too bad. Finally, they probably have tenure, which means not only could they not get fired for not doing research, etc., but they are eligible for at least a semester off every 7 years or so.


There are 88 people who have (age + UT time) of 93 or more just in the UT College of Liberal Arts? Out of how many, I wonder.


This is not unusual. Buyouts like this go back at least 30 years in the corporate world. My father took a buyout and then went to work for another company for another decade before finally retiring. I've known at least a couple of dozen others that have taken buyouts in one form or another over the years. They almost always go to work somewhere else.


What is their marginal product and what is their value on the open market if they take the buyout and consult or find some other way to sell their accumulated human capital?


If you're close to being ready to retire anyway, or have a back-up plan for employment, it would foolish to turn down free money.

Ian Kemmish

The question as put is unanswerable. Someone with no money in the bank would likely reach a different answer to someone with a fat portfolio of patents and lots of money put aside.

Justin James

Take it, and immediately start looking for a job elsewhere. Putting two years' pay in the bank and getting one pension while simultaneously earning another paycheck is a winner.

I had a teacher in high school, he was a retired USAF colonel (Pension #1), had taught at one school long enough to get another pension (not sure if it was full or partial) and was teaching at our school long enough to qualify for at least a partial pension. That's a pretty smart move if you ask me.


To old to die young

It is a good deal for those close to the usual retirement age and very good for those above that age. It is one way to get professors over age 65 to step aside and allow the college to hire new faculty and at a lower salary. OTOH - if they replace these tenured professors with part-time adjuncts - shame on them.
For younger faculty - and I doubt that there are many in this bunch - they better be ready to never have a full-time job again. Very few colleges and universities are hiring full time faculty. Most try to nickle and dime their teaching needs with part-timers who do not make even minimum wage for teaching a course. Many highly educated and very talented Ph.D.s who would love to teach at the college and university level are unable to find full-time jobs.

Drill-Baby-Drill Drill Team

Would I Retire for a Buyout?

Answer depends on degree. How Much?

Annual payout can range from $1000 to $1,000,000. $1000 will not budge me. But @ $1 million per year, I will be out the door before the ink dries, leavng a person shaped vacuum vortex .


There are three different variables to calculate: money, time and status. Right now, I'd take the money and get another job. If I was short before retirement, it'd be more complicated. At that point money isn't a big concern, because all important and expensive investments - college, house, children - had been done. I guess it depends what I would do with that additional free time. If I had another project like writing a book at hand, I'd take the severance packet; if not I'd stay professor and enjoyed my higher social status.


There were buy-outs like these in the mid-90's at the University of California, Berkeley. (I don't think the criteria were exactly the same, but they were similar.)

There were two groups of people who jumped at the offer: (1) people who were planning to retire soon anyway (more money, less work); and (2) people who were active and well-respected enough to land a tenured job at another university.

The problem with this sort of buy-out is that while it may help "accelerate" some pending retirements, it doesn't clean out dead wood that isn't already planning to leave.

Public institutions (perhaps private ones too) don't seem to be able to offer retirement incentives only to people performing below average (or if you like, to deny them to the top performers). It would be interesting to couple a special merit raise and retirement incentive system in such a way that anyone who received an "exceptional merit raise" in the past five years wasn't eligible for the early retirement.

As for me, I'm still far away (age+service is just 62). I have a hard time imagining responding to such an offer, but if I had to make a decision, I'd probably pass it up. Two years of salary isn't enough for the disruption in like that would be involved. Then again, I _like_ my job.



The teachers can't be fired because of tenure, but why would other companies resort to buying out? Unions, maybe. It would be nice if UT could simply fire professors. It seems there are obvious efficiency gains (otherwise why pay to get rid of them?)

As for the buyout, if I were in such a position, I would definitely take it. I think the strongest reason to decline the buyout is the lack of opportunity elsewhere, with the exception of the very old.


To jason:

Companies offer buyouts to more expensive staff, not because of unions, but because firing expensive employees looks an awful lot like firing elderly employees, which is a crime. So, even if you're not doing it on purpose, it will be very difficult and expensive to prove you aren't out to get the elderly, so its better to offer the buyouts (which always come along with a release to sign).


i intended to post a detailed response, however I think estimating the Dr. Blogger Prof's salary makes for an easy answer. At over $400,000 (2 times estimate income) in the higher range for econ profs the answer is that I SURE would!


However, was I a latin american studies full prof and my payoff was only $160K (and the fact that I'd prob have less accumulated wealth) probably not.


This scenario calls for you to evaluate what the opportunity cost of each choice is for you. "Ike many have already pointed out it's essential to know what you value more or what would be most efficient use of that time/money. Some people might value their opportunity to teach more than the money. Other might not.

As for the strategy of the bailout itself it seems as a great example of the use of incentives to influence human behavior. Like the many instances of these incentives before there are sure to be negative unintended consequences to them like too many proffesors taking the buyout.

Jeff #3

My mother was a teacher and had the same offer come up a few years ago. Early retirement with the acceptance of a few years of salary. The 'was' in the first sentence helps indicate that she took it.


This may not have been an unusual offer a long time ago (for non-execs in the corporate world at any rate), but it's highly unusual now. I haven't seen a 2 year salary buy out since 1990. Now there's just a whole lot of 'out' and not much 'buy'.

If your combined age and years of service is over 93, and you're not in a position to retire even without an incentive, you've made some poor decisions along the way.

I see too many people that are eligible to retire continuing to work until they end up leaving feet first on a gurney. If someone's eligible and able to retire and doesn't take advantage of it I think they're making a mistake.


It depends on the amount of money the College of Liberal Arts at UT is offering me for two years of not working. I would have to measure the marginal cost and the marginal benefit of accepting the buyout. If taking it means giving up the work that I love for two years, losing practice of working and perhaps not being able to get an equal paying job if I want to work afterwards, then the marginal cost of taking the buyout outweighs the marginal benefit which is getting payed for two years without working. But, if I am content with the years I've been working and I feel that it could be time for me to retire and spend more time with my family and do more things for myself, then I would choose the buyout.

It all depends what is the opportunity cost of giving up your job and taking the buyout for two years. In the end, you should carefully choose what has the less opportunity cost on your own life, and once who measure those marginal benefits the decision will be the best one for you.



Read some other thing recently, the earlier you retire, the longer you live.

I think this goes to show how easy being a university professor really is - what a job! People aren't going to be doing MY job into their eighties, out of love..I keep telling my neices and nephews, go for the university professor job - NOT teaching high school, that is the opposite..teaching at a university..You lecture on what you love, you research on what you love, you run two classes a week, you have NO responsiblity for the students to learn, they are old enough that it is THEIR job to understand you! Add a few more weeks of geust lectures and student presentation days, and you are into summer, two months off, which noone else gets - two whole consecutive months off- what a life!