Spending lesser than two years in a single position is called as Job hopping, this can be a very controversial subject. This can lead the way for a higher salary but at the same time it can also be a red flag to potential employers. And not to forget, the future financial goals if the retirement plan is based on the cashing the fund every time you move. The choices regarding career growth and retirement plans which might affect in long term financial plans has to be thought through before changing jobs, even if it is once a year or once a decade. The next question that would arise is of what to be done with the retirement fund received.
The very common thought of people on using their pension money is to pay off the debts. The statistics from Alexander Forbes Member Watch showed that almost 91 per cent of the members do not retain their pension money while changing jobs. In the times where most of the income from the household is being spent on financing debts and most people use this job hopping only to get access to their retirement amount as this serves them as quick fix, using that money to pay off debts. But what one doesn’t know is that these quick fixes comes with a price, and in this case it can delay your retirement plan.
Early admittance of your retirement fund can result in: Not having enough money at the time of retirement, merely because most of it was already was used or not saved enough for the time of retirement. Depriving yourself off of the compound interest that you could have theoretically earned from the investment. Never building as make up for the lost profit. Creating a bad practice that will delay you from attaining your retirement plan and anticipated income at retirement.
It is very easy to cash in the money from a retirement fund but it is way harder to make up for the loss of the benefits or the capitalized cash in the plus interest. The likeliness of the need to invest more than the expenditure, double your contributions towards the pension fund for you to make for the lost benefits depending on the retirement age and the investment time horizon. As only 6% of the South African residents are reported to have gathered enough to retire securely, without having to sacrifice their current standard of living, so that means you will most likely have to invest much more towards your retirement fund to make up for the lost savings.
Thus, the recommended option while job hopping is that, leaving the retirement funds invested or preserved in a protection fund. This will help to keep you committed to the retirement plans. Changing jobs might be a life altering events and it is thus an important to seek advice before doing so, from a professional financial adviser who is going to specifically guide you in the retirement planning. This will ensure that the retirement days and its needs are well taken care of, including the financial well-being of you and your family in most of the cases.
