Your options when you leave
When you leave an employer, your pension does not disappear. Depending on your fund's rules and the law, you can usually choose one of three options.
- Preserve it. Leave your benefit invested in the fund, or move it to a preservation fund, until you retire.
- Transfer it. Move your benefit into your new employer's fund so all your savings are in one place.
- Take it as cash. Some rules allow a cash withdrawal. It may be taxed, and the money stops growing for your retirement.
The real cost of cashing out
A cash withdrawal can feel useful at the time, but it costs far more than the amount you take. At 7% growth a year, US$5,000 left invested at age 30 could be worth about US$53,000 by age 65.
Every withdrawal also resets your savings clock: the years of growth you give up cannot be recovered later.
Before you sign anything
- Ask the fund administrator for a written statement of your benefit.
- Ask which options the fund rules allow, and whether any tax applies to each.
- Check whether your new employer's fund accepts transfers.
- Take time to decide. You do not have to choose on your last day of work.
Keep your details up to date
If your fund cannot reach you, your benefit may become unclaimed. Give your fund your new phone number, email and address whenever they change, and keep your beneficiary nomination current.