Recently, I've been having a lot of conversations with people either anticipating a job transition or having undergone a voluntary (or involuntary) job change. Your job is the most important part of your financial picture. It's important to consider the financial impacts of the change.
As someone who has been through a job transition, I can attest to the importance of having a comprehensive transition plan before leaving your job or retiring. Without it, you may find yourself making rushed decisions about your money, and that's never a good idea. You want to make sure you have a plan ready.
Here are the top 3 financial considerations that can have a major impact on our future financial stability, and having a plan in place can help you navigate these changes with confidence.
Your Retirement Savings
First and foremost. let's talk about retirement savings. Whether you have an employer sponsored registered retirement savings plan (RRSP) or a registered pension plan (RPP) it's important to consider your options when leaving a job or retiring.
There are three main options on what to do with your money:
One option is to transfer the funds to a new employer's plan. If one is available.
Another option is to transfer the funds to an individual RRSP or Locked-In Retirement Account where you maintain control of your money.
You may have the option to cash out the account. But this should be a last resort as It will trigger a significant tax bill and you lose out on the opportunity for your savings to stay tax deferred.
Each option has its pros and cons. You'll want to get some advice to ensure that the decisions you make are in your best interest. Remember. this is your money.
Your Extended Benefits
When it comes to benefits, understanding your coverage and options for continuation is critical. Especially, if you rely in these benefits to provide medical or professional services which can be costly. Here are three important considerations:
You may have the option to convert your extended benefits to an individual plan within certain time limits.
You can enroll in your new employer's plan. But, there may be a lengthy probation period before you become eligible to their plan,
Or, simply lose coverage altogether.
It's important to weigh the costs and benefits of each option, and to factor in the cost of any continuation coverage when creating your transition plan.
Your Bonuses and Severance
Finally, let's not forget about outstanding income or bonuses. Before leaving a job or retiring, it's important to make sure you've received all outstanding income and bonuses. and to consider the tax implications of any severance packages or other payouts. You'll want to plan accordingly and budget for any tax obligations so you can maximize the benefits of your transition.
In conclusion, having a comprehensive transition plan is key to a successful job change or retirement. From retirement savings to benefits coverage and outstanding income, there are a lot of pieces to the puzzle. By taking the time to plan ahead and make informed decisions, you can ensure a smooth transition and set yourself up for success in the future.
Let's make sure we cover all the bases before you make a significant financial decision with a transition plan that is tailored to your unique needs and goals.
Here's what to do now...
If you're considering an employment transition in the near future it's never too early to start planning for it.
Gather all of your important documents such as pension and RRSP statements, benefit booklets, and information about bonuses, or severance packages.