What happens to my retirement plan if I change jobs?

Leaving your employer for a new opportunity is exciting, but what happens to the money in your group retirement plan if you’re not retiring yet? You have options for that money, and you’ll want to pick the one that aligns with your goals. To help you decide, here are some tips on what to expect and the options you could choose from.

What to expect when you leave your job

When you leave your employer, you’ll get a statement or letter that will tell you what your options are for the money in your plan and if you need to decide by a certain date. It will also tell you any rules that apply that affect how much you can take with you or what you can do with it. For example:

• Vesting rules—Tell you if you’ve worked for your employer or participated in your plan long enough to be entitled to employer contributions
• Locking-in rules—Affect what you can and can’t do with the money before you retire
• The commuted value of your defined benefit (DB) plan—Tells you much your plan would be worth if you transferred the money out today

Once you look over your options, think about taking your non-locked-in money as cash. Just be sure to understand the costs and impacts of cashing out your retirement savings early.

• Taxes—You’ll immediately pay a withholding tax on the money you take based on how much you’re taking and where in Canada you live. The amount you take gets added to your taxable income for the year, so you may pay even more tax on top of the withholding tax.
• Losing tax-sheltered compounding interest—You lose the benefit of earning money on money tax free. 
• How it affects your retirement goals—You’ll be putting a dent in your retirement savings, making it harder to reach your goals.

Keep your goals in sight

As you get ready for your new challenge, take the time to think about your retirement plan. You’ve worked hard for that money, and the option you choose should be one that aligns with your needs and goals. If you need help, get advice from your financial advisor, and take advantage of the services of transition specialists that your employer’s plan provides.