Why Job Hopping Hurts Your Retirement

Promise of a substantial salary hike by your current employer’s rival company, wooing you for some time to join its ranks, can be really enticing. After all who does not want to earn more? But, wait! Is it all worth it especially when it has not been even two years since you joined your present work-place? Such job offers or seeming opportunities could as well be a honey-trap if you bite the bait without assessing the pros and cons of your action. Any step taken in haste may as well translate into a difficult post-retirement phase with very little savings to fall back on to meet your essential daily and old-age health and other expenses. Is, then, job hopping, such a bad thing to do when a large section of employable young and mid-career professionals these days take it as a short cut to higher salary jobs and quick rise in life? Not in the least, if one does his or her homework well and chalks out an exit plan on the basis of existing financial standing to cope with the vagaries of a life after retirement.

Don’t hop, instead save!!

It has been established now that frequent job-changes have a debilitating impact on retirement savings. A study by ‘Employee Benefit Research Institute’ concludes: In 2008 the median job period of workers in the US was 5.1 years. The figure has since come down to nearly 4.4 years, as per ‘Bureau of Labour Statistics assessment’.

Frequently job-hopping? Face the music!

  • Saving for retirement becomes difficult
  • It means moving in and out of retirement coverage. Result: small nest egg
  • In some organisations new employees need to wait before they can join retirement saving plan
  • In some organisations 401(K) match schedules are meant to reward long serving employees, for job hoppers there is little to gain
  • May have to forgo employer contribution to 401 (K): ‘Fidelity’ finding on the basis of analysis of about 500,000 retirement savers who quit jobs in 2013
  • “Chronic job hopping could really sink your retirement savings,” cautions Meghan Murphy, a director at ‘Fidelity’

What Employers Want?

  • Over one third of employers insist on employees continuing with them for at least 5 years to keep their full match: ‘Plan Sponsor Council of America’ finding.
  • About 14 per cent of employers insist workers stay with them for a minimum of 2-3 years to get any money: Plan Sponsor Council of America finding.

Damage Control:

  • Important to go through current employer’s vesting schedule related to 401(K) and profit-sharing contributions
  • Be wise: If waiting for a few more months enables you take thousands of dollars in saving then continue with the same employee till that time-frame
  • Don’t hesitate to negotiate with new employer even if not fully vested in your 401(K). Tell them how you will lose in savings if you quit now
  • Some employers may like to compensate for the loss by agreeing to pay higher salary or a signing bonus.


  • It is recommended that job hoppers sock away 10 – 15 per cent of salary each year to insulate him or her against any unforeseen financial difficulties
  • Plan your retirement well in advance
  • Ideally start saving when in your 20s

Can Self directed IRA be saviour?

  • In fact, all IRA are self-directed. So the use of word self-directed is redundant
  • IRA or ‘Individual Retirement Account’ is a type of individual retirement plan
  • Banks, brokers or similar financial institutions provide it
  • It ensures tax benefits on retirement savings for taxpayers in the US
  • Individual retirement accounts and broader category of IRA fall under it
  • A trust account is set up for the only benefit of taxpayers along with individual retirement annuity
  • Taxpayer purchase an annuity contract or an endowment from a life insurance firm
  • Self directed IRA allows IRA account holders to invest in a broader range of alternative investments such as real estate, private mortgages, private company stock, oil and gas LPs, precious metals, horses and intellectual property
  • While investing IRA assets into alternative investment it is imperative to select right self-directed IRA custodians
  • Majority of custodians dealing in stocks, bonds and mutual funds are incapable of providing proper custody to alternative investments
  • As per Internal Revenue Service (IRS) norms either a qualified trustee, or custodian, should hold the IRA assets on behalf of the IRA owner
  • Custodian of a self-directed IRA may allow account owner access to a selection of standard asset types including stocks, bonds, and mutual funds
  • Account owner can invest an investment that is not barred by Internal Revenue Code or IRC

Best option!

This brings us to one pertinent question: Where should you save your retirement money? If you go by public perception based on real time experience then tax-favored IRAs and 401(k) clearly stand out as the most attractive propositions. Retirement plans allow retirees to defer taxes on the money saved and returns earned within account. This entails: contributed amount becomes tax free till one starts withdrawing it years later. In the process, more of your money earns you investment returns over a period of time.

10 Surprisingly Easy Ways to Retain Your Employees

Hands down, the most important investment you could possibly have in your company is your employees. Are you investing a large percentage in hiring the right employees? Do you have a winning team? If so, employee retention should be your top priority. Here are 10 surprisingly easy ways to achieve it.

  1. Develop an employee retention strategy
    Don’t leave this to the last minute, or go into it unprepared. You’ll be flying blind. The best way to approach this is with your eyes open, with a plan. Narrow down all the variables when it comes to your company and specifically what your employees need to thrive. Keeping all of these factors in mind will better help you figure out how to approach the situation.
  2. Keep things in perspective
    It’s easy to give in to the mindset that new technology is what will benefit your business most, but what good is that technology without valuable players who really know what they are doing? Having top-notch people on your team is key. Did you know that according to recent studies you can spend up to 21 percent of an employee’s annual salary replacing him or her? The morale of one or two unhappy employees can affect the morale and work performance of the entire company.
  3. Be a good listener
    It’s important to be receptive to your employees. Communicate with them about their needs, and foster an open dialogue about their careers, their objectives, and what is going on with the company. A successful business is fueled by communication, and ignoring your employees could cost you your company.
  4. Value your employees
    Since a company is as good as the sum of its parts, understand how important it is to invest in your company through finding the best people for your team. Once you have them, you have to put emphasis on the importance of cultivating this relationship. Unhappy, dissatisfied employees leads to a high turnover rate, which is bad news for your company. Value them, and they will value you and your company.
  5. Give credit where it is due
    Make sure to pay attention to outstanding work performance and dedication, as well as rewarding it accordingly. This leads to a healthy work ethic and professional relationship with your employees. When they are rewarded for their outstanding performance, they will feel valued. Happy employees equals a productive company.
  6. Foster a good work environment
    There’s nothing worse than dreading going into work because of an imbalanced environment. This can be aggravated by excess stress, pressure, as well as improper distribution of work and resources. Who says work can’t be fun, productive and rewarding? Foster a positive, driven, happy environment, and it will go a long way for your business.
  7. Stop micromanaging!
    Micromanaging should never happen in a successful company. You picked the members of your team for a reason. Communicate rationally and effectively about what you expect for your employees, and make clear, realistic deadlines. When your expectations and goals make sense and are communicated effectively, all you need to do is trust your employees to carry out the work that is expected of them. If you feel the need to micromanage, you have the wrong people working for you.
  8. Differentiate
    Figure out what is most important at work, and strive for the bottom line, while treating your employees well. They deserve the utmost level of respect, as you deserve respect from them. Stop focusing on all the little details and shift your perspective instead toward the bigger picture. When you take control of your company in a graceful, inclusive way, it positively impacts everyone’s work performance.
  9. Treat all your employees fairly, but not all equally
    Many companies make the mistake of treating everyone exactly the same. This is a misconception. The best businesses recognize the strengths and weaknesses of each individual employee, as well as which employees have better work performance. Endeavor to reward your top players primarily, and notice how this positively affects your company.
  10. Get data on your employees
    Even if it is a pain, it is essential to conduct employee surveys. Make sure they follow these guidelines:
  • Anonymity so your employees can feel confident in being completely honest
  • Responding so your team sees that not only do you care what they have to say, but you will endeavor to foster a better work environment by improving, based on their opinions
  • Feedback sharing so your employees will have the utmost sense of open, healthy communication as a company
  • Schedule surveys so you can regularly conduct them. Notice how things change over time. It’s important to be committed to this.

The bottom line is simple: invest in your employees and you invest in your business. When you endeavor to communicate, encourage, inspire and help their careers grow you work to create the best company possible and stay on your “A” game.

About the Author: Ava Collins is an online marketing associate with Hicks Professional Group as well as the IT staffing company’s HR manager.

photo credit: Jakob Nilsson-Ehle via photopin cc