Changing Jobs: How does it Impact Your Retirement?

Are you thinking about changing jobs? It could impact your savings and your retirement based on several factors. Here are some things to consider and actions to take after changing jobs.

Before changing jobs

Here are a few things to consider.

Your new pension plan

If your new employer offers a pension plan, what type of plan is it? A defined-contribution pension plan? A defined-benefit pension plan? A group RRSP or TFSA? Do you already have access to a pension plan with your current job? If so, compare both plans and what they mean for you in retirement. For example, a defined-benefit pension plan is often more advantageous because you know in advance how much you will receive in retirement.

A workplace pension plan can significantly reduce the savings you will need for retirement. To get a clearer picture, you can use our SimulR tool to estimate your retirement income and compare how much you will need to save once you start working for your new employer compared to your current job.

For example, let's say that you must set aside $200 from each pay for your retirement and, with your new job, you will have access to a pension plan to which your employer contributes. You may find that you only need to save $150 per pay, which is $50 less than before! When your employer contributes more to your plan, it means you have to save a smaller portion of your salary.

Your group RRSP or TFSA

If you have a group RRSP or TFSA with your current job, what happens to the share your employer contributed for your retirement? Will you be able to keep the contributions? Check with your former employer.

Your employee benefits

Employee benefits can have an impact on your budget, especially regarding insurance. If your new job offers employee benefits, what are they? Insurance (life, disability or salary, critical illness, health, prescription drug, etc.), pension plan, paid vacation, flexible hours, access to telemedicine, etc.? Depending on your situation, this could be really important.

In any case, it is essential to take out a disability insurance if you do not have one with your new job. Plan for it as soon as possible. You need to protect yourself because losing your income due to an accident or illness is your biggest financial risk.

Your new expenses

You should also calculate any expenses that may be added to your budget because of your new job, such as parking, transportation, and new equipment.

After changing jobs

Here is what you should consider once you start your new job.

Your former pension plan

If you had a workplace pension plan with your former employer, can you transfer the amounts accrued into a locked-in retirement account (LIRA)? If you choose to, you will have to manage the amounts yourself. Your money could be used to provide you with retirement income, and you can start using it as of age 55.

In the case where your new employer offers a pension plan, could you transfer your money into it? You will probably also have the option of leaving the amounts accrued in your previous pension plan. This means that your contributions, your employer's contributions, and the interest will remain in the plan, which will provide you with a pension when you retire.

Take the time to carefully assess the different options with a specialist. You can also check your pension plan's credit rating. That way, you can see how reliable it is. The rating is indicated on the statement you receive each year. A pension plan is really important. It is worth taking the time to ensure you have the highest possible income in retirement and to avoid costly mistakes!

If you had a defined-benefit pension plan, find out about the choices you can make: Draw your defined-benefit pension  or transfer its value?

Your health insurance

If your employer offers a health insurance, is it worthwile for you? You are required to at least take out a prescription drug insurance. However, if your spouse has insurance, check whether it would be more advantageous to take out his or her insurance.

Your savings

Does your new job offer a higher salary? If so, can you set aside more money with each pay? Saving makes you more financially secure, and doing it automatically is the most effective way to achieve your goals. Think about it!