Monthly Archives: April 2011

Leaving a Job, Talk to an Advisor

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Leaving a JobOur last post was about a friend of mine who was contemplating leaving a job that they had been at for over 20 years. There are all kinds of issues to consider in making this kind of decision and we listed some of them in the post – Should I Change Jobs.

This post is more focused on what should I do when I change jobs about the pension money that is given to us when we leave a job. In Canada, you are not just handed the money, instead, the law requires that these funds be placed in a locked-in RRSP which you can only gain access to at age 55 or later. Even then you can only take out a certain percentage each year, around 6.5% initially. There are some laws that let you transfer some of the funds to a regular RRSP at a later date.

Leaving a Job- Talk to a Financial Adviser

This is where you need to get really serious about your retirement planning. You are leaving a company, they are giving you the vested amount of your pension and it will be locked into an RRSP. How should you invest it? What risk should you take? What are the regulations about withdrawals? There are loads of questions such as this which only someone in the business working every day on these subjects can really help you with.

Find a good financial adviser, who knows what they are talking about and is not just trying to sell you stocks and mutual funds. In fact, it is a good idea to interview several before making a decision about where you should place your investments.

Talk to friends, business associates, and professionals. Don’t just take one answer because it sounds good or they sound really confident. You need to collect as much information as you can and make your own decisions about what is right for you.

Even this post and blog is only one source and we blatantly will tell you that we do not have all of the answers. Each person is different, has different requirements, and different goals. Investigate and make the most informed decision you can.

Once You Have Made a Decision, Monitor Your Investments

This is so important. You cannot just make your investments and then walk away without tending to them on a regular basis. Treat your retirement plan and investments like a garden. It needs regular care, weeding, and watering.  So does your retirement RRSP.

Weed out the poor performing stocks, mutual funds, and any other investments you may have. Evaluate your risk tolerance. Invest in new growth investments, and collect dividends and interest on a regular basis. Pay attention to the investments. Never place it all into one stock or mutual fund, diversify and avoid high-risk investments unless you can afford to lose it all.

Meet with Your Financial Adviser

Starting a new job is always stressful, and leaving a job is also stressful. Just look at the issues to consider that we discussed in the previous post – Should I Change Jobs. However, this will pass. You will get settled into the new job. Get to know the people. Learn what you need to learn. Perform at a level that meets the needs of the new organization you moved to.

Once this period is over, and it should only last 3 to 6 months at the most, set up regular meetings with your financial adviser. Review your investments and assess the health and income that you are receiving from your investments.

This is so important and most advisers will initiate these meetings as well. However, if they do not do this, then you need to take the initiative. Meet with them on a regular basis. Review your statements. Make sure that everything is invested in a manner that meets your needs.

In summary, when you have answered the question – Should I Change Jobs – the next step is huge in the sense that now you are responsible for managing your retirement fund and making sure that you have enough money to retire and live the quality of life that you need and want.

Comments about this post are welcome as are ideas and subjects that we may not have considered.

Discuss Finances with your Spouse

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Discuss Finances with your SpouseMy friends in the financial planning business routinely tell me about couples who do not share information with each other about their finances and how one spouse or the other has no clue about what would happen to them financially if the other spouse were to suddenly pass away. Discuss Finances with your Spouse. A car dealer also told me that routinely many guys will come in and purchase a car, which is a major purchase. They do not even tell their spouse about it before completing the deal. Another friend of mine was looking for some advice about investments. So I sat down with him to go over what his options were.

I expected his wife to join in and at least listen. She not only did not join in the conversation, she said she had no interest in the subject and felt that her husband would make all of the right decisions. What a mistake in my opinion. In fact, now he has been diagnosed with short-term memory loss and probably does not even remember the conversation that we had with each other. This is another reason both spouses should be involved and at least know what the other is doing. Now she has no idea of what he is doing or has done and must investigate at some point. all of this could easily be prevented. It does not mean that she has to make the decisions in this case, but at least know where everything is, how much money is involved, and what the investments are.

Discuss Finances with your Spouse – Get in Involved

Even my own wife will not get involved in the details, although I have introduced her to our financial adviser and I routinely discuss investment changes with her, I know she is only half listening.

It is a well-established fact that women live longer than men. Chances are that your wife will have to deal with the aftermath of your investment planning. Doesn’t it make sense that she should know what is going on? I purposely used these genders in the previous sentence, since this appears to be by far the norm. With baby boomers retiring in droves it is even more important that everyone take more interest in planning their retirement years.

Men and Women have Different Goals and Objectives for Retirement

It should not be surprising that men and women have different ideas about retirement. Even though you have been with your spouse for many years your plans and opinions about what you would like to do in retirement may be quite different.

The only way to get at this is to start talking about your finances and your plans. Using a financial plan as the catalyst is a good way to start. A financial plan requires assumptions to be made about your needs for retirement. So discussing these assumptions will go along way to getting each other engaged in planning your finances.

Two Heads Better than One

Two heads are better than one anyway and I have definitely found that with my own spouse. Some of her desires are different from mine. She has come up with ideas and suggestions that I would not have thought about.

Sometimes when you state an assumption and someone asks you to justify that assumption, you are going to find out that you cannot. This challenge is good in that it makes you think things through better. So take challenges in a positive light and not as an affront to your planning skills.

Discuss Finances with your Spouse – Who Is Dominant

This subject may seem archaic. However, in every relationship, one spouse will be more dominant than the other in various areas. If one cares more or has more expertise, let them take the lead. However, never relinquish the topic solely to the other spouse. You need to stay involved for the reasons I mentioned earlier. Make a contribution to the discussion.

Your dominant spouse will appreciate your input and thoughts. Keep a mature attitude about the subject. Do not let your emotions get the better of you.

It is not easy to do a financial plan emotionally with your spouse. But it is well worth the effort. Once you have all of your assumptions made and the facts about your current situation identified, developing the financial plan is pretty simple! Use a third-party to assist in developing the plan. They can act as the common sense expert to help you through this emotional process.