.jpg)
1 hour ago
2
Article content
“People have definitely become aware of the live issue of tax consequences, and it’s the net dollars that matter to employees,” said Pinkus.
Article content
Jordan Damiani, an investment advisor at Meridian Private Health, cautions people about planning their life around a severance but said planning after you get that lump sum becomes important.
Article content
“When you receive a severance, you really have to ponder your plans,” said Damiani. “Some people receive it close to their retirement dates, and it’s actually what they want. It’s in essence a bonus they have been waiting for. Earlier in your career, it takes on a different meaning, and it could be part of your lifeline.”
Article content
If you find a job quickly, you could push up your taxable income to a higher bracket because you had two jobs in the same year and the severance on top. Damiani said it is worth filling out what is called a TD1 with your new employer, which is a form for additional tax withholding.
Article content
“Your new employer is probably not going to be aware you have all this other income,” said Damiani, adding that it helps avoid a tax bill at the end of the year.
Article content
Article content
From a tax perspective, if you get a really large sum, it makes sense to use up any RRSP room you have, provided you won’t need the money for day-to-day living.
Article content
“If you don’t have something lined up, I wouldn’t rush to put that money in an RRSP because you have until the first 60 days of the following year to offset any income,” said Damiani, adding that having to take it out later because you ran short it means you permanently lose the contribution room.
Article content
Putting your money in a tax-free savings account won’t lower your tax bill, but it might hamstring you a bit because if you put money in and they want to pull it later, you need to wait until the following January to get the space repatriated.
Article content
“You could find another job and say I don’t need all this money,” he said.
Article content
One thing changing in the workforce is people are not in jobs as long, said Cal Jungwirth, director of permanent placement services at talent recruitment company Robert Half Inc. While awards are rising for even shorter-tenured employees, long-tenured employees generally get larger settlements.
Article content
“It’s rare. I’ve been doing this 20 years, and I’m seeing those long-tenured people a little less than I used to,” said Jungwirth.
Article content
Article content
American adults are expected to have 12 jobs in their lifetime, according to the U.S. Department of Labour. But close to half of those jobs are held in youth years. The growing consensus is to get ready for multiple careers in your lifetime, with a few breaks.
Article content
“It’s healthy to have awareness of what is going on in the marketplace,” said Jungwirth. “If you get the sense you may be pushed, it can make sense to be proactive. But you don’t want too much movement. The biggest filter organizations have is too much movement.”
Article content
How much is too much? Hard to say, but every two years and a track record of it gets tougher to explain, Jungwirth.
Article content
Sometimes you have no choice, but his main advice is not to panic, and he said during a severance period you can use the opportunity to upgrade your skills, something he says you should always be doing.
Article content
“It’s like going to the gym. You need to continue to go all the time,” he said, cautioning that when you get laid off it’s probably good to clear your head and not just apply to “100 different jobs” but ask what you want to do strategically.
English (US)