Job Hopping and Your Retirement Plans

Ray’s Take: There was a time when you worked your entire career at one company and retired with a pension and a gold watch after 40 or so years of service. But, like so many things, that picture has changed over the years. Job hopping – once a red flag on your resume – is now the norm.


In the short term changing jobs can be a winning proposition. It’s a quicker way to move up the ladder and often offers quick cash incentives. Changing jobs can work in your favor. But before you jump on the opportunity, stop and do the math on some important factors that may impact you negatively down the line.


The first thing to assess is how long have you been at your current company. Some companies require you to work for them for a specific period of time before you can contribute to a 401(k). And once you’ve hit that number of years, many require you to remain for a specific number of years, usually five, in order to keep any company matching contributions. Are you losing retirement savings money by making the change to another employer? Review other benefits as well. Health insurance, life insurance, disability insurance, HSA’s all cost money. Some companies short on those “boring” details in order to “fluff up” that salary number.


According to the Bureau of Labor Statistics, workers currently stay at a job for 4.4 years. So if you’re at any company that requires five years to keep your company matching funds, the odds are that you will never see that money. That can really add up over time. If you do leap, be sure to move your retirement account with you.


There are alternatives to company sponsored 401(k) plans to start putting money aside for your independence. It’s important to create a retirement saving plan early and stick to it. The earlier you start, the better off you will be once you close in on retirement. It’s hard to make up money lost by not saving early. And even harder to be old and broke.


Dana’s Take: Young people entering the job market now have never seen the 40-years-and-a-gold-watch retirement plan. For most of them, their experience with the working world is watching their parents struggle with being downsized. So it’s really no surprise that they have a different mindset toward employment than previous generations.


That experience created a sense that companies are not loyal to their employees. And so, why should the employee be loyal to the company in this new world view. It’s become kind of a chicken and the egg conundrum. Which came first?


Whether working in the gig economy or for a lifetime employer, saving for the future is something that never changes, and being smart about it won’t go out of style.


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