And the typical Millennial (in their 20s and 30s) expects to stay in a job for less than three years, meaning they might have 10–20 jobs over the course of their working career!
This is hardly a new development according to the Employee Benefit Research Institute (EBRI).
“Career-long jobs never existed for most workers,” said Craig Copeland, senior research associate at EBRI. “Historically, most workers have repeatedly changed jobs during their working careers, and all evidence suggests that they will continue to do so in the future. The idea of holding a full-career job and retiring with the proverbial “gold watch” is a myth for most people.”
From all reports, job hopping seems to have a mixed impact on your career. On the downside, many employers shy away from applicants who change jobs every couple of years, thinking that the time spent training them is wasted once they leave. Research by the American Sociological Review suggests that workers who frequently change jobs generally end up earning less than their more stable counterparts.
On the upside, job hopping might initially offer more rapid advancement and a wider array of work experiences, plus the opportunity to keep looking for that “perfect” fit.
If you’re a frequent job changer, you need to master some special financial strategies to make it all pay off:
Have enough money in reserve to protect you if you’re out of work, or in between assignments, for several months. The last thing you want to do is run up credit card balances or sell investments to pay the monthly mortgage.
Take your 401(k) with you when you leave a job by rolling balances to your personal IRA so you’re in control of investments, beneficiaries, payouts, and costs. It’s virtually impossible to properly monitor and manage your investments when you’ve got pieces spread across several ex-employers.
Sign up promptly for the 401(k) plan at your new employer as soon as you are eligible and contribute as much as you can, aiming for 10 to 15% of salary. “Nearly half of US companies impose a waiting period before employees are permitted to join their 401(k) plans. Most often the delay is six months, although it can be twice as long,” writes Beth Healy of the Boston Globe.
Try to stay long enough to become vested in company 401(k) matches or other benefits. If you leave too early, you risk leaving money on the table.
When you’re new on the job, and not yet eligible to participate in the 401(k), you absolutely need to save on your own in a Roth IRA or personal investment account. Otherwise, those “gaps” in your savings will cost you big time down the road. We just ran the numbers to see how much you could lose by changing jobs every three years. If each new employer makes you wait a whole year before enrolling in the 401(k) plan, you could lose out on an astounding $530,000 over the course of your career, ending up with 47% less in your 401(k) account than if you had contributed without interruption.