Your Options if You Resign
What happens to your retirement money if you leave Woolworths?
Before you resign, you will need to decide what you want to do with your retirement fund investment. Remember, the aim of a retirement fund is to provide you and your family with financial security when you retire and are no longer able to work.
Don't cash out your retirement savings
In the long run, it’s not just how much money you make that will determine your retirement. It’s how much of that money you put to work by saving and investing it.
If leaving your employer
One of the important financial decisions you will need to make is what to do with your retirement savings if you leave your current employer. Changing jobs brings temptation that could impact the rest of your life. The option of withdrawing your retirement savings in cash is very tempting, especially if you start thinking about everything that you could do with that money. Short-term satisfaction seems to get the better of you, rather than weighing up the long-term benefits of preserving and growing your retirement savings. One of the issues you will face along the way is cashing out your accumulated retirement savings when resigning. The consequences of this can be disastrous. While saving for retirement throughout your career is important, preserving your funds when changing employers must be at the top of your list of priorities.
Preserve your funds!
Not cashing out your benefits will help to ensure that you are in a better position to retire comfortably one day.
If you do not preserve your funds:
Preserving your benefits will also earn you compound interest, where your interest earns interest. The interest on your investment returns compounds over time, turning even modest savings into sizeable amounts after only a few decades. Compound interest means you are earning interest on interest. This is basically growth on growth. We are also living longer, so we will need even more money to retire comfortably.
NEVER CASH OUT – your future self will thank you!
When you resign you have two options:
1. Preserve your Fund Credit
This will help you to achieve financial security after retirement. You can preserve the savings that you have built up while working for Woolworths through one of the following retirement vehicles:
a) The Woolworths Preservation Option
This has been designed specifically to continue to look after your investments under the same investment strategy as the one used prior to your withdrawal. This is one of the cheapest ways for you to preserve your funds. If you have a housing loan you will need to settle prior to the transfer taking place.
b) Any other preservation fund
This is likely to be a more expensive option than using the Woolworths Preservation Option and you will need to settle any housing loan prior to transfer taking place.
c) Your new employer’s pension fund
You will need to discuss this with your new employer prior to transfer and establish their policy regarding housing loans, if applicable.
d) Any retirement annuity fund
You will need to settle any housing loan prior to transfer.
2. Take your Fund Credit in cash
but tax will be deducted before your Fund Credit is paid to you, thereby significantly reducing its value. You may take part of your Fund Credit in cash and transfer the balance to a retirement annuity fund, in which case you will only pay tax on the cash withdrawal.
You may also convert your current Fund death benefit, your disability benefit and your Group Life Assurance (GLA) to private membership. The attraction of doing this is that you won’t need to have a medical examination, but you will need to provide your latest HIV test results. The procedure is as if you were buying cover in your personal capacity.
You are advised to call the Alexander Forbes Advice Centre on 0860 100 983 prior to leaving the company in order to obtain professional advice on the various options available to you.