Job Hopping Can Impact Your Client’s Retirement Fund
Employers are seeing more new hires rotate out of a position sooner, according to one Ohio firm.
Opoc.us, a consultancy firm that works with mid-size companies, said new employees are leaving positions within one to two years instead of five to seven years.
Factors that play a role include a new hire's attitude, gratitude for prior and current professional relationships.
Forty-five percent of employees plan to stay with their employer for less than two years, according to a 2017 CareerBuilder survey.
But while job hopping has become more common and comes as a result of various reasons, such job applicants need to consider the impact switching jobs will have on retirement.
"It is important to review how your retirement account can be affected. Waiting periods, disappearing employer-matches, early withdrawal taxes and penalties can affect your employer-sponsored retirement account," said Meg Ferguson in a blog post for ProNVest, a registered independent investment adviser.
Some of the typical reasons to switch jobs is career growth, more money and lack of satisfaction with the current position.
Ferguson cites a Linkedin survey where 45 percent of respondents said they were concerned about the lack of opportunities for advancement, followed by 41 percent who were unsatisfied with the leadership or senior management.
On the other hand, millennials are job-hopping as frequently as baby boomers did in their twenties, according to Bureau of Labor Statistics data.
Ferguson writes that waiting periods prevent employees from accessing their company's 401(K), which can typically last as long as a year.
While employees can contribute to an outside IRA, its contributions have a smaller limit than a 401(K) without catch-up contributions.
Employees can also lose their employers matches because they didn't work with the company for certain amount of time before leaving them.
Employees are recommended to have both an IRA and the company's 401(K), said financial expert Chris Hogan in a blog post on financial guru Dave Ramsey's website.
"Your goal is to invest 15 percent of your income toward retirement. When you have a 401(k) and an employer match, contribute enough to the 401(k) to receive the full match," he said. "Then invest the rest in your Roth IRA. When you don't have a 401(k), increase your contributions to your Roth IRA to maintain your 15% retirement savings goal."
"And don't forget - you can roll over the balances of your old 401(k)s into your Roth IRA," he added. "This will make it easier to keep up with your retirement accounts and give you more control over which mutual funds you invest in. A rollover can also affect your income taxes, so talk with an investing advisor before you roll over any old 401(k) balances."
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