Our last post was about a friend of mind 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 lets 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 were 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 the 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.