It is not an easy task to be faced with an unplanned career transition, such as a facility closure or the financial downturn many businesses are experiencing as the pandemic evolves. Layoff, early retirement, and furlough are different outcomes that can stem from the same scenario, and only you can decide which is best for you, and your family.
Here are some considerations you should focus on as you decide what transition makes sense for you and your family.
Budgeting and Cashflow – What will your income look like for the next month, quarter, and year? Will you have any employment income, severance payments, government benefits, or will you withdraw savings? How does your expected income compare to your expected expenses? Do you know where every dollar goes currently? How will this change? Have you identified expenses that you can eliminate and/or purchases you can postpone? A budget does not have to be complicated, a simple list of your expenses and when they are due will suffice.
Emergency Fund – Do you have access to liquid assets to supplement or replace your income? Where is it held and what is it invested in? Ideally, this is a source you can access within 24-48 hours and has no costs or penalties for withdrawing. For those who may be entitled to a lump-sum payout as part of a severance package, consider using this to establish or enhance your emergency fund.
Retirement – Are you being offered a retirement package? Are you ready to fully retire or would you like to work part time? Are you confident that you can work somewhere else for a few years before retiring on your own terms? What does retirement really look like to you? If you’re not certain that you can work elsewhere, how can you adjust your desired retirement lifestyle to meet your new reality? Look at your other retirement income streams (CPP and OAS) and any new expenses you will incur once you retire.
Protection – How does your protection change when you leave your job? Will your health and dental coverage extend beyond your last day of work? Do you or any members of your family need to acquire new coverage? Your life insurance coverage at work will likely end. Do you need to find an alternate way to protect your family? Is it possible to convert or continue your coverage, or will you need to acquire new coverage altogether?
Moving – This may not be your first choice – or this may present the opportunity you have been waiting for. Moving could be costly upfront but may save you money in the long term. Will your emergency fund suffice to cover the initial costs, or will you need to borrow money? If you’re changing jobs, will your prospective employer assist financially with the move? You may be able to deduct eligible moving expenses if you satisfy certain criteria. Ask your accountant what qualifies you, and if you qualify, what expenses are eligible. And keep your receipts.
Transitions can be difficult, but they also present opportunity. Take some proactive steps to sieve the opportunity and make the changes that are best for you. And, as always, consult with the proper professionals before taking immediate action.
