Years and years ago, remaining with the same company for your entire career was not just common, it was considered the norm, unless there were layoffs or the company went bankrupt. But today, in the land of the GenX and Millennial workforce, staying with the same company, and sometimes even in the same career path, is highly uncommon. According to LinkedIn analysis of their users, college graduates between 2006-2010 had, on average, three different jobs within their first five years in the workforce.

So what does that mean for retirement? You may be wondering, will I ever be able to retire? Should I never switch companies, even for a better job prospect? Taking steps forward in your career or making career shifts with a new company should not be discouraged, but too much movement may put you, and your retirement funds, at considerable risk, and here’s how:

1. 1. “Cashing out” can hurt your pockets – If you have only been with a company for a short time, but have begun to contribute to a 401(k), it may seem enticing to cash out the small sum in your account when you leave the company. Unfortunately though, cashing out that money will not only incur taxes on the sum, but will also land you with a 10% early distribution penalty.

1. 1. Waiting periods for 401(k)’s – Many companies require employment for anywhere from three months to a year before you can join their retirement program, meaning you are losing months of contribution if you move jobs too habitually.

1. Distribution of Employer Matches – Many retirement plans also require a certain length of employment before new employees can remove employer-matched 401(k) funds when they leave, a requirement you may never fulfill if you aren’t there long enough.

While there are many drawbacks to moving companies, if a switch is needed, or gets you closer to your personal or financial goals, solutions are available to keep your retirement plan moving forward. You could open your own IRA, roll your 401(k) funds into an IRA if you leave a company, or, if your new employer permits transfers, roll funds into a 401(k) plan at your new company. Although annual IRA contribution amounts are lower than those of a 401(k), any advisor will tell you that contributing something into a retirement fund is better than not contributing at all. No matter your career path, there is fundamental value in considering your future beyond the workforce, and employees should not let their retirement funds slip through the cracks.

If you have any questions or would like to discuss how we can help with retirement planning, please contact me at brian@brammerandyeend.com.