(MONEY Magazine) – Imagine this scenario: You walk into the office one day to find your boss offering you a bunch of money—three months, six months, perhaps even a year or more of salary, plus other perks—to walk away from your job forever. It's more money than you've ever gotten in one fell swoop—enough to pay down some debt, take time to find a better job, maybe launch that business you've always dreamed of or even retire for good. On the other hand, you like your company, you don't like change, and you certainly don't relish the idea of being out there looking for work in today's tough job market.

As U.S. companies continue to downsize at a record pace, you or someone you care about could easily be facing exactly this conundrum. Last year, in fact, was the fourth in a row that annual job cuts exceeded 1 million, according to outplacement specialists Challenger Gray & Christmas, and the barrage shows no sign of letting up in 2005. If your employer is among the many offering buyouts in an effort to cut costs, here are five questions you should ask yourself to determine whether the deal makes sense for you.

1 How secure is my job? Corporate leaders don't offer buyout packages out of the goodness of their hearts. Buyouts are simply a less painful way to downsize than firing people outright. But if too few employees head for the exits, layoffs could be next. So take a hard look at your standing in the company to figure out whether your job is vulnerable. If, say, you've recently been passed over for a promotion or the guy in the next office always gets the plum assignments, you may be fair game.

If you don't want to leave your job, voluntarily or otherwise, now is the time to make yourself indispensable. Volunteer for tasks no one else wants, e-mail your boss with a great idea every week, do the very best work you can. If you determine that you can't realistically tilt the odds back in your favor—say, you've had a couple of lousy performance reviews or your boss just never liked you—seriously consider accepting the package. "If you're relatively expendable, you're almost always better off taking the offer that's on the table," says David Berman, a certified financial planner at Berman McAleer in Timonium, Md. "It's rare for a later offer to be more generous."

2 How secure is my company? Even if you like your job and think you're safe from future layoffs, you should consider what a buyout program signals about your company's long-term prospects. In particular, you need to assess whether the downsizing is a one-time event or the beginning of a long-term slide in your company's or industry's fortunes. Notes Steve Gross, a compensation expert at Mercer Consulting: "If you're uncertain about your employer's future, a buyout allows you to get out while the going is still good."

3 How fair is the offer? Although the specific terms differ from company to company, buyout packages usually provide a lump-sum payment based on your salary and length of service—say, one or two weeks' pay for every year you've worked there. Many also include health insurance benefits for the length of time of the payout and other perks, such as career counseling services or faster vesting in retirement plans. (For more on what to expect, see "Buyout Basics," below.)

Although the buyout is usually presented as a take-it-or-leave-it proposition, in practice there is often room for negotiation. If you are seriously considering the offer, you owe it to yourself to see if you can get a better deal. "When the job separation is voluntary, you have more leverage because there's no question of misconduct or poor performance," says Paula Brantner of Workplace Fairness, a nonprofit that educates people on their job rights.

To figure out what you can reasonably ask for, check with former co-workers who have already accepted a buyout to see what they received. One common request is to stay on the payroll for the length of your payout period rather than accepting a lump sum. This is particularly helpful if you think it might take several months to land a new job and you don't want a big gap on your résumé. You can also ask for a later departure date or extended health insurance benefits.

4 What would I do next? A buyout package can provide the financial means to fulfill your career dreams—to retire early, launch a business, try a new field or look for a better job. Before you take the leap, though, you need to consider whether those fantasies are realistic and what it will take to make them come true.

If you're hankering for a new job, for instance, estimate how long it might take to find a suitable position, and whether your payout will cover your expenses during that period. The average length of unemployment has ballooned to more than five months from less than three months in the late 1990s and is even longer for many professionals. If you're considering a completely new field, be realistic about whether your skills are transferable to another industry and whether you'll need additional training to land an appropriate position.

If instead you want to retire altogether, you'll need to calculate whether the buyout, combined with your own savings, is really enough to support a comfortable lifestyle for, say, the next 30 years or more. Even if you've amassed more than $1 million—and most people have socked away a lot less than that—drawing down your nest egg at the recommended 4% to 5% annual rate will yield an income of only $40,000 to $50,000 a year.

In fact, the only way to accurately determine if you can afford to take the buyout and pursue these other goals is to run the numbers, preferably with the help of a professional financial adviser. You'll have to figure out your current and future expenses and how that matches up with the money you'll get from the buyout, plus any future income, savings and retirement benefits.

You'll also need a strategy for managing the payout. If you plan to add the money to your existing savings and retire, you'll need to invest it so that it can last for 30 years—or longer. That means putting it in a diversified portfolio of stocks, bonds and cash. If instead you need to live off your good-bye cash in lieu of a paycheck until you can land another job, put it in a money-market account or fund for safety and easy access. At the same time, in that case, it would be wise to rein in your spending.

5 Am I emotionally prepared? If you ultimately decide to say yes to the deal, understand in advance that you'll need some time to adjust your head, as well as your wallet, to your new circumstances—even if all the changes are positive. "There's a natural emotional cycle that people go through after taking a buyout," says Larry Kleinman, executive vice president at DBM, a human-resources consulting firm. "There's an initial phase of optimism accompanied by a sense of relief or excitement about the change in your life." That tends to be followed, though, by a sense of loss or a feeling of being unmoored, Kleinman adds. The more carefully you've thought through the decision and the better you've prepared financially to leave your job, the quicker those feelings will pass. And that's good. Because the sooner you leave that old job behind mentally, the sooner you can move on to the next phase of your professional life.