Picture this: Your organization is downsizing, reorganizing, restructuring, cutting back, being sold, or experiencing some other form of shake-up, and they’re offering an early retirement package to eligible employees. You fall into this group. Is this good news, or bad news? Should you take the offer or not? How do you know if it’s a good deal for you? Here are some things to think about to help you evaluate the merits of the offer.

Can you afford to retire now? Before this offer was made, what were your plans for the future? Were you seriously thinking of and planning for early retirement? If so, this might be the best thing that could ever happen to you. Maybe you can use this money to subsidize a new career or a business of your own, or simply fund the retirement you’ve been dreaming of.

On the other hand, maybe you were planning to continue working until you were 65 and this has given you a whole new scenario to think about. You need to take a realistic look at what your future expenses and income will be, and see how they match up. On the expense side, don’t forget about inflation and taxes—they’re not going to go away. Do you still have children to put through college? When will the mortgage be paid off? Add up your anticipated income from all sources and see where you stand. You may need to consider part-time or full-time employment after you leave your current employer if you think there will be a significant shortfall in your income versus expenses exercise.

Is there a severance package? Many early retirement offers include some form of severance as a deal sweetener. This sum might be based on your years of service (e.g., one or two weeks of pay for each year of service). Will it be enough to get you through the transition period? Will it be paid in a lump sum or periodic installments? Either way, it will probably be taxed as ordinary income, so figure that into your equation.

How will it affect your pension? If your organization has a traditional pension plan, your benefit is based on a combination of salary, years of service, and your age when you start taking your benefit. Leaving your job before you’re 65 may reduce the pension benefit you would otherwise have earned. Is your organization going to help you fill that gap? Some organizations may add as many as five years to your current age and/or to your length of service to increase your benefit and make the package more attractive. Whatever the amount of your benefit, remember that you’ll be receiving that smaller benefit for a longer period of time. Will it be enough?

Do you have a defined contribution retirement program? Generally, when you retire or terminate employment, you have a couple of options for your account balance. You can roll it over to an IRA or another qualified plan if you go to work somewhere else. This keeps your account whole and continuing to grow until you eventually take it out. You can take a lump sum and either spend it or invest it, but that has major tax implications, especially if you’re under age 55 (59 ½  if any portion relates to a former retirement plan. Please note that 457 plans don’t have this tax implication). Sometimes you can leave your balance in your former program until you’re ready to take it at some future date. Explore all your options and their consequences carefully.

If applicable, your Social Security benefit will be affected if you take early retirement, too. That benefit is based on your average earnings over 30 to 35 years of work—fewer years of work, and no more salary increases may produce a smaller benefit than you anticipated. And even though you can begin receiving your Social Security benefits as early as age 62, your benefit will be reduced by about 20 percent from what it would be if you waited until full retirement age (65 or later, depending on your year of birth). Does the early retirement package include any additional benefit to help bridge the gap until Social Security begins?  (Keep in mind that not all people are part of the Social Security system – like some local and state governmental employees.)

What about health insurance? Soaring health care costs, coupled with longer life spans, means that health care expenses will be a much bigger retirement expense than most people might have anticipated. Is your employer offering continued health care coverage as part of the deal, and if so, for how long? Through retirement? Only until Medicare kicks in at age 65? Can you purchase your own health insurance through your employer’s group coverage? Can you afford private insurance?

In addition to the financial aspects of the offer, you can’t overlook the emotional element involved. You may be elated to be offered an easy way out of your current employment situation if it’s been less than happy lately. On the other hand, this may seem like a sudden and unwelcome end to what you had thought was a longer career. Either way, there is often strong emotion tied into this situation. Acknowledge it, deal with it, but don’t let it get in the way of your decision. And don’t let the emotion cause you to burn bridges or create unnecessary enemies if you choose to leave.

And what if you decide to stay? Sometimes staying is a real option, and sometimes it isn’t. What if you’re the only person who doesn’t take the offer? How will that affect your ongoing work? Double your workload? Triple it? Are there other opportunities available within your organization? Is this a one-time offer, or might you get another (better) offer in the future if you decide to stay now? How stable is your employer? This “offer” may really be a signal that it’s time to go, with the package or without it. Is anything negotiable? Sometimes you don’t know until you ask.

The tax implications and financial planning issues of taking an early retirement offer are complex and confusing, with far-reaching effects. Seek the advice of your accountant or tax adviser as well as a financial planner before you make any final decisions. And keep an eye on the calendar as you’re contemplating your options—most early retirement offers come with a deadline of 30 to 90 days.