It’s estimated that before you reach the age of forty, you might already be into your 10th job! By the time you contemplate retirement, that figure will probably climb to 15. That’s a lot of job hopping, and in a recent survey of 10 000 people cited “being in a dead end job” as the major reason for switching from one company to the next. It’s statistically unlikely that anyone reading this blog post will retire from the same company they joined 30-years earlier. All of this raises a very important question you probably haven’t thought about:

If job hopping is the norm, how does that impact our retirement planning?

That’s a good question.

Hands up if your folks worked for the same company for 40-years before retiring. From a retirement planning point of view, it was the perfect scenario. You had plenty of years to belong to a company retirement fund that probably had the employer match the employee contributions. Also, enough time to ride out any market fluctuations along the way which meant that, by the time your folks decided to hang up the company access card, they had accumulated enough money to see them through their golden years.

Now let’s consider the new retirement planning scenario:

  • You might have as many as 15 different jobs during your working life.
  • Perhaps 50% of those jobs will include belonging to a company retirement fund.
  • That means 7 or 8 different retirement plans along the way.

What are you going to do with all these small retirement plans?

Cashing out your retirement every time you leave a company isn’t a great idea for obvious reasons. In a recent blog post called “How much do I need to save to retire on R20K per month?” we looked at how much money you need to accumulate for retirement.

If you do decide to cash in your pension fund, make sure you understand the tax implications of your decision. Below is the SARS tax table for retirement fund withdrawals (tax year ending Feb 2020) Your first R20 000 is tax free, but after that the amounts start getting pretty hefty.

 

Taxable income (R)​ Rate of tax (R)​
0 – 25 000​ ​0%
​25 001 – 660 000 ​18% of taxable income above R25 000
​660 001 – 990 000 ​R114 300 + 27% of taxable income above R660 000
​990 001 and above ​​R203 400 + 36% of taxable income above R990 000

If you find yourself job hopping and, as a result, end up joining and leaving a bunch of different company pension funds along the way, consider taking out your own retirement annuity so you can transfer these pension fund monies into it along the way. The transfer is tax free and will allow you to accumulate all your pension monies in one saving’s facility.

You might have 15 jobs in your career, but you only need one personal retirement plan to bank all your pension fund monies along the way.

Until next time.