Should you take the severance package? Run the probability, not the payout.

Every severance calculator on the internet does the same arithmetic: weeks of pay times years of service, minus a flat withholding estimate. Useful for checking the offer letter — useless for the decision you're actually facing. Nobody lies awake wondering what 32 weeks times their salary is. They lie awake wondering: if I take this, do I ever have to work again?

That question can't be answered with a number, because the future of your portfolio isn't a number. It's a distribution — thousands of possible market sequences, some of which are fine and a few of which are not. The honest answer to "can I retire on this?" is a probability, and the good news is that probability is computable from things you already know.

Runway is not readiness

The first trap is confusing cash runway with plan success. A $300,000 net package against $120,000 of annual spending is "2.5 years of runway" — true, and almost irrelevant. Runway tells you how long you can defer the question; it says nothing about whether your portfolio, Social Security timing, and spending trajectory survive a 40-year horizon. Plenty of people with 15 years of runway have plans that fail in a third of simulated futures, because the tail of the plan — healthcare before Medicare, a long horizon to a younger spouse's age 95, a bad market sequence in the first five years — is where retirements actually break.

Sequence of returns is the real enemy

Two retirees can earn identical average returns over 30 years and end up in wildly different places depending on the order of those returns. A 2008-style crash in year one of retirement, while you're withdrawing, does damage that the same crash in year fifteen does not. This is why a Monte Carlo simulation — running your exact plan through thousands of randomized market sequences — tells you something no average-return spreadsheet can: not what the typical outcome is, but how often the bad orderings sink you.

The inputs that actually move the answer

When you run the simulation, a few inputs dominate everything else. Spending is the biggest lever by far — and it should be layered, not flat: essential costs run for life, discretionary spending typically tapers in your 80s (researchers call it the retirement smile), and healthcare deserves its own line because the years between a layoff and Medicare at 65 can cost a couple $25,000–$35,000 annually. Second is the horizon: plan to age 95 of the younger spouse, not your own. Third is Social Security timing, which is the cheapest longevity insurance you will ever be offered. The severance package itself, ironically, is usually a second-order input — it buys runway and de-risks the early years, but the plan lives or dies on the other three.

A decision framework

Run your plan and look at the success rate to the horizon. Above roughly 90%, the package is likely an offramp you can take, and your remaining work is optimization — tax brackets, Roth conversions, healthcare sourcing. Between 75% and 90%, you're in the borderline zone where one more year of work, a modest spending trim, or a later Social Security claim typically moves you into safety; test each and see which point is cheapest for you. Below 75%, the package is a bridge to the next job, not to retirement — and knowing that clearly, before you sign, is worth more than any payout calculator will ever tell you.