A recent survey by LinkedIn shows that those who graduated between 2006 and 2010 had an average of nearly three jobs within their first five years after college. Although it’s understandable to job hop for better opportunities, it’s also important to be aware of potential effects this can have on your retirement.
For example, these days many employer retirement plans have waiting periods before employees become eligible to participate. The waiting periods can range from three months, to as long as a year to qualify.
People who are constantly job hopping before they’re even eligible to participate may be missing out on opportunities to save. To address this, some have turned to opening their own Individual Retirement Accounts (IRAs). Although IRAs can’t accept as much in contributions compared to a 401k, at least an IRA allows people who aren’t settled down yet to start saving for their retirement.
Finally, those who job hop may have more temptations to cash out their 401k early. However it’s important to beware of potential penalties and taxes, which can really chip away at retirement savings.
When considering career opportunities, make sure you also think about the impact your decisions may have on your retirement savings.
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