I was recently asked by a friend for some advice about changing jobs and basically starting a new career. I am always a bit reluctant to give this kind of advice. Because you do not want to be responsible for the person who follows your advice. If the new job does not really work out very well, what then?
I prefer to ask the person a number of questions and point out areas that they should consider. After all it is a very personal decision and it really depends on the situation that person finds themselves in. It is impossible for me to know what their situation really is and how they should respond.
What is the Situation and Should I Change Jobs
First of all it is important to understand the current situation that my friend is in. they work for a private company for the past 20 years, their pension is vested, however they are not eligible to collect a pension yet due to their age. Unfortunately there are situations at the company which has a lot of people upset including my friend. For example on Dec 31 , 2016, any one retiring after that date loses their health benefits. They retire with a pension, but no benefits. They cannot retire until Jan 2017!
The management situation at work is not a positive environment. They are looking or appear to be looking to retire people early and bring on new hires. My friend feels that even though they have fantastic reviews , they may be a target sometime in the next 5 years before they retire to a pension with no benefits.
I also feel that my friend is probably a bit bored and not challenged in the manner they used to be and that means you usually do not do your best work! That is just a human situation and not a criticism.
What are the issues to consider?
- Pension into locked RRSP
- How much, are you penalized in any way
- Can only withdraw % starting at 55
- Sick days
- New pension?
- RRSP goes to survivors
- Must decide how to invest
- Opportunity to advance?
- Probability of being tapped to leave current company
- Are you leaving any money on the table
- Benefits when you retire from new company
- Job satisfaction
Comments about each area mentioned above:
Salary – the new job may mean a drop in pay, but there is potential for upgrading and there are better benefits when they do retire
Benefits – no benefits at the current company vs. benefits at the new company when they retire
Pension into locked RRSP – Current pension will likely be placed into a locked in RRSP, and collected when they turn 55
How much, are you penalized in any way – Leaving early usually means you are penalized in some way regarding the amount of money you take with you
Can only withdraw % starting at 55 – percent you can draw at 55 is around 6%
Vacation – Probably will have less vacation since new employer will not want to provide as much vacation to a new employee
Sick days – currently no sick days allowed, while new job provides for sick days automatically
New pension? – What do you need to do to qualify for a pension at the new company?
RRSP goes to survivors – a big benefit of withdrawing pension from existing company is that anything that is left when you die goes to your estate and your survivors, not to the company that paid into your pension.
Must decide how to invest – With a self managed RRSP , you must invest wisely and carefully, this is your retirement
Opportunity to advance?
What are the opportunities to advance and increase your salary to catch up to were you were ?
Probability of being tapped to leave current job – There is a strong feeling by many people that they will never make it to retirement and will be tapped anyway to leave before their time for retirement is ready.
Are you leaving any money on the table – always the big question. How much money are you leaving. Can you negotiate a better package to take with you?
Benefits when you retire from new company – Never a a 100% guarantee, but then they already know that they will be retiring without benefits at the current company
Challenge & Job satisfaction – go together. Many people like a challenge and will not do well if they are not challenged and their job satisfaction suffers as well. This can be a downward spiral so sometimes it is a good idea to move on and take that next job!
Finally, always make sure that you have an offer in hand before you make the leap from your current company. You never want to find yourself without a job in today’s current economy.
Comments about this subject are welcome. Additional ideas and suggestions about what everyone should consider when looking at another job would be much appreciated.