How To Negotiate A Severance Package

How Many Months Of Severance Would It Take To Quit Your Job?

Hot Fudge Sunday With Cherry On TopAs part of my book writing process, I interviewed over 80 people face-to-face to beter understand people’s risk tolerances.  Funny enough, about half of them were interviewed while I was relaxing in a hot tub up in Lake Tahoe.  If you want to start a fun dialogue, ask this question next time you’re soaking with sangria in hand!

The 80 people produced a range of answers between 0 months to 36 months of living expenses in severance in order to quit their jobs.  The median number, somewhat surprisingly was only about 3-6 months!

The people I spoke to ranged from 23 year old recent college graduates to 55 year old men and women who longed to do something new.  Almost everybody had dreams of doing something else, although about 10% said they loved their jobs and were happy to keep on working for another 5 years.

It definitely seemed like the younger and older ends of the spectrum wanted to do something new.  Those in the middle, ages 30-45 seemed a little more content doing what they were doing, but still had the itch.


Observations of those willing to accept six months severance or less to quit:

* Younger e.g. in their 20’s or older than 50.

* Had at least one year of living expenses in savings, with many having 3-5 years +.

* Seemed more extroverted based on how long they’d sit and chat.

* More entrepreneurial in nature e.g. talked about businesses they wanted to start vs. new jobs they wanted to have.

* Many had very average to below average paying jobs.

* Men were more aggressive to take less if they knew what they would be doing.

Observations of those who need more than a six month severance to quit:

* Have more stable occupations e.g. worked for the state, accountant, lawyer.

* Have higher paying occupations e.g. lawyer, banker, dentist, doctor, engineer.

* Have children.

* Have more than one mortgage.

* Have unpaid off consumer debt.

* Have recently changed careers in the last five years.

* Many were in their mid-30’s.  It’s as if they were just starting to taste success after paying their dues in their 20’s and didn’t want to give it all up yet.

* Women seemed more conservative in general, not wanting to risk their livelihood without a clearly defined plan.


For many of us, receiving a nice severance is just a bonus for leaving a job we wanted to leave anyway.  About 20% of the respondents said they wouldn’t need a thing thanks to some new plans on the horizon.  Meanwhile, another 10% just wished the company laid them off, even with no severance so they could “get on with their lives.”

When I started seriously thinking about quitting my job in 2010, I didn’t even factor getting a severance into the equation.  All I thought about was how to save the most and make my savings throw off enough steady cash flow so I don’t need to work again.  The more I researched the process of severance, the more I realized what an enormous potential windfall we could all have!

Discussing a way to get a severance package almost seemed taboo to about half the people I talked to.  They wanted to either just get up and quit, some with barely any savings or just keep on biting their teeth and working.  People don’t approach it as an engineer would in a methodical, calculated, and multi-variable outcome way.  When you know your rights, you know your worth!

I am on the more conservative side of things and told myself that if I could get 36 months worth of severance, I would pull the trigger.  I didn’t want to lose my deferred compensation if I quit at the very least.  When I finally signed the separation package agreement, the amount of severance I got equated to roughly 72-84 months of living expenses!  Six years was a serious no brainer, even for a conservative person like myself.


It’s been around six years since I started Financial Samurai and I’m actually earning a good passive and active income stream online now. The top 1% of all posts on Financial Samurai generates 31% of all traffic. The average age of the top 1% posts is 2.3 years old. In other words, after putting in the hours to write some very meaty content over two years ago, 10 posts consistently generate a monthly recurring income stream that’s completely passive.

I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with BluehostYou never know where the journey will take you!

How To Engineer Your Layoff is now available in Mobi and ePub format in addition to PDF.

How To Make Money Quitting Your Job




Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    I would leave my job for 3-6 months severence….but I am young at only age 32. There are many other things I would like to be doing for a living. I also have at least a year’s worth of living expenses in that would give me plenty of time to figure out my next move.

    • says

      Holly, sounds like you are in a good spot! How long have you been working at your one job and how long more do you think you’ll last? I recommend narrowing down what you do to two things before making the move.

  2. San Diego says

    I would take 6 months because that would be more than enough time for a short hiatus and to find another position in my profession. Out of curiousity if you were laid off are you entitled to severance or is it a good will gesture of the employer? Who is eligible for severance?

  3. says

    Hi Sam, I’m one of the lucky ones, I have a unique combination of work and leisure that makes my life in great balance. Principal in a co. where I am portfolio mgr of securities, teach at a university, and editor of personal finance website. And a supportive spouse with a good job and steady income. I wouldn’t change a thing.

    I’m totally blown away that you could negotiate such a huge severance package. I guess I’ll have to read the book to find out how :)

  4. says

    I think even in this economy those young (or young at heart) should have at least 6 months. That’s what I got and it’s already been three and no sign of a job in sight. Great post!

    • says

      Love double questions with questions! Most important metric is value based on living expenses. A $200,000 severance might last someone three years, or only 6 months. It all depends on what one’s comfortable operating costs are.

      • says

        That is what i figured. You would be a complete rockstar if you got 6 years salary that is for sure! Regardless the fact that you negotiated a severance with the intention of leaving anyway is a feat of its own. If I ever find my self wanting to do the same I will definitely be buying the book.

        • says

          Yeah, it’s definitely more than two years btw. In most agreements, the dollar amount must be kept private, but thanks for your interest! 72-84 months of living expenses is conservative, but that’s my style.

          The book is written for people to read well before they decide they do need to engineer their layoffs.

  5. says

    I think 36 months is a good, round number. I have a large mortgage and a kid (planning on more), and my wife is at home. I am building a tax practice, so it would give me time to focus on that, as well as online endeavors to create multiple income streams. Ideally, I’d get back to my income level or above in less than a year.

    • says

      Good stuff Jacob. It’s taken 2-3 years of hard work for me to get to barely 50% of my base income level. It’s not easy. But, hopefully with more time now, I can make up for the other missing 50% sooner.

      I do believe if we dedicate 36 months to anything, most of us will succeed.

  6. says

    I would need at least 12 months, but more is always better ;)

    I’m pretty confident I could find a new job quickly, and I would welcome the time to start some other projects, but how much debt I still have makes me uncomfortable to go any amount of time without employment and a big cushion. Once I”m debt-free next year and can start building my financial assets, I could afford to take a smaller severance package.

    • says

      12 months definitely is a good amount. One can always cut back after to make a shorter severance value last longer too.

      You’re going to love being debt free! You’ll feel like a race car who finished burning some starting rubber and is finally zooming ahead!

  7. Darwin's Money says

    That is an awesome question. I saw that because we had a “volunteer” memo go around last year checking with employees to see if they wanted to volunteer to be laid off given x severance. I think my level would have been like 30-40 wks or something. For me, much would depend on my prospects of lining up employment elsewhere. If I had started a search in advance and had some decent leads (and if my wife was working with benefits at the time), I’d probably go as low as 1-1.5 yrs. Otherwise, it would be quite a bit higher to get me to leave now.

    • says

      Wouldn’t it be perfect if you found another gig, or decided to just retire and saw that Volunteer memo that same year? Make sure you develop those relationships so you can get the first call!

  8. Chris says

    I would take 6 months. I have always wondered what I would do in a situation like that. I am in such high demand though I don’t think I’ll be laid off anytime soon ;). Just kidding, I’m sure plenty of people have ate those words as fast as they typed them. I think getting laid off would force me to get creative. I’ve read about many people who started out by saying, “So one day I was laid off…” and went on to build an incredible company or write a best seller. It’s the notion implied in “The Millionaire Next Door” that if you’re forced to survive you will do significantly better than someone who has little to no challenge in their life. I’m much more of a sink-or-swim kind of guy.

    • says


      And imagine if you had a huge war chest in savings, and were able to compartamentalize it so that you pretend you had nothing. You could feel that back against the wall feeling and go out and go for it! Even if you fail miserably, you’ve still got that savings to rely on.

      To feel the pressure without having to suffer the negative consequences of failure… if one can find that medium, that is golden.

  9. Mike Hunt says

    I don’t “need” any months of severance to quit the job. But of course if I’m going to leave I’ll be maximizing the severance that I get. Here in SEA the labor laws are pretty cut and dry. More than 4 months but less than 1 year is 1 month severance, between 1-3 years is 3 months, between 3-6 years is 6 months, 6-9 years is 9 months and more than 10 years is 12 months severance.

    I have a 3 month notice period in my contract and have almost 4 years experience, so I am looking at 9 months of severance plus anything else that can be thrown in on top of that.


  10. says

    Are we talking in dreamland, or real world? Because realistically I cannot expect more than 1-2 months. Obviously I would love 6-12 months. (As a benchmark, I just turned 24 and work in the bereft field of publishing.)

    Did you recently change your tagline? I love ‘honourable personal finance’ as a slogan.

  11. says

    With family obligations, I would say 1 year of living expenses would be good for me to want to jump in on that. If younger (in 20’s, let’s say) with no kids, I would say 6 months and I’m gone! There are time when we can more afford to take risks, and being younger with no dependents is one of them!

    Great question!

  12. says

    Just found your site today from MMM, but I already love it. In my own circumstance, I’ll make a pretty solid military retirement (as long as the government doesn’t go bust or something), so we’re frugalizing our life to find our baseline standard of living, then I’m looking to generate income streams to make up whatever difference is left. I’m documenting the process over at , but I can’t wait to pore through the nougaty financial goodness here at your site now that I’ve found it!

  13. says

    I probably would not take any. I love my job and what I am doing.
    Ocassionally I go through the routine and have to do not very exciting stuff, but in overall.

    I do want to have financial independence, but most likely I will keep doing what I am doing.
    The only difference I will go freelance and will concentrate on the aspects I do like.

    Typical practice in our company is one month of pay of your current package for one year of service.
    Of course when you grow up to managerial type position it becomes more generous.

  14. says

    At this point I would need 3+ years as I am already planning on working about 3 more years and saving as much as I can. I am fortunate that I like my current job, and right now I can handle being a part-time entrepreneur on top of it. Time definitely goes by faster than I would like though, since I feel like I always am (or should be) doing something.

  15. Jayadeep Purushothaman says

    I was not considering any severance at all – but a year of living expenses would be what the maximum I could bargain for in my country. But a 5-year stay in any company would give you another year of living expenses. Found your blog today – thank you for penning down your thoughts though it is US-oriented one.

  16. says

    I have to say, I’m trying to figure out how to get my company to offer me a package right now – I have another offer on the table right now, so this would just be a bonus. I guess I should check out your book! I can honestly say, if they offered me 3 months, I’d probably be happy (government organization).

  17. TJ says

    Interesting conversation here. However, no one seems to be considering a severance-payment requirement that is probably not unique to my company. All employees were offered a severance package with a payout rate at 50% of normal salary. For my length of service, the total would have been 40 weeks of pay spread out over 80 weeks. A key requirement was that the payments would stop if I accepted full-time employment elsewhere. So, the offer was really only attractive for people who were leaving the workforce for family, retirement, education, or bootstrapping up a new business. More than 90% of those who accepted left for retirement. The other 10% were all in their 20s.

    • says

      Very interesting severance structure on 40 weeks of pay spread out over 80 weeks. Are you in a gov’t job?

      The reason why spreading payment out over 80 week vs. a 40 week lump sum payment is due to liability and operation reasons. Most firms want to have a clean cut, vs. dragging things out over such a longer period of time.

  18. megan says

    I would want 6 months severance. It would be enough to pay off all my debt and still have 5-6 months living expenses. Unfortunately I do not have much savings at the moment and would depend on a severance package to keep me afloat. I know exactly what I would do if/when I leave my job, but it requires a lot of start up money that I just don’t have the means of getting right now. I really need to get my finances in order.

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