You’ve started a new job that you thought was going to be great. The interview went well, the benefits package options were stellar, and the job responsibilities seemed to be right up your alley. It’s been months, and now management isn’t following through on their promises, the culture is problematic, and you aren’t sure this is the right career choice for you. You could quit, but you’ve already changed jobs twice in two years.
Do you stay and push through the issues, or do you leave and start the search again? There’s no clearly defined answer, but the job hopping trend is growing, which could potentially be detrimental to retirement savings.
How Common is Job Hopping?
Job hopping is most popular among the millennial age group. Those who graduated between 2006 and 2010 had, on average, close to three jobs within their first five years after college. This is higher than people of the same age group in previous generations, but it isn’t surprising considering a lot has changed on the career landscape over the years. Not only has the career mindset shifted in younger generations — from having a job that supports you to having a job that makes you happy — but economic and educational landscapes also play a role in decisions to change jobs frequently.
Older generations tend to stay at a job longer, but lifetime-company loyalty is something that is gradually becoming less common. The more that job hopping becomes acceptable to recruiters and common among the workforce, the more that people feel okay to leave one job for another — or a few jobs for a few others. It’s not as much about company loyalty anymore as it is about career happiness. Changing careers with limited employment history can be difficult, whether you’re limited in experience or limited in job variety, but more and more people are feeling like it’s okay to do so.
To Stay or Not to Stay
Now that we know job hopping is becoming more common, especially for the younger workforce, the question is whether or not you should do it. First off, there are always reasons why you should. Job satisfaction, company culture, and fair treatment are all important aspects in a career choice. For younger people maneuvering their way through their first professional job, they may not know exactly what they are looking for until they find it. If you are unhappy, treated unfairly, or you have a great opportunity somewhere else, you should not feel guilty for hopping from one job to the next.
There’s risk involved in hiring people that frequently change careers due to the time and money it takes to train someone, but it’s a necessary risk. As long as you’re not exploiting the system, it’s fine to find the right career for you.
On the flip side of this discussion, there are always reasons why you shouldn’t. The more infrequent your paychecks are, the more infrequent your income is. Since a career is typically a person’s biggest financial asset, it’s dangerous to spend time being unemployed or not having a steady paycheck. If bills are paid late, your credit suffers. If your credit suffers you may be affected financially long-term, and find that as a hindrance in finding a new job since your credit report is sometimes an aspect of the hiring process. Credit repair is always a possibility, but it’s best to manage credit before it comes to that.
Beginning a new job carries with it a ton of financial information. Are you immediately covered by your new employer’s insurance or will you have to find outside insurance until then? What happens to your 401(k)? This is where job hopping can really affect you negatively and it’s worth consideration and a look into your personal budget.
The Possibility of Losing Retirement Savings
It’s not a big secret that saving for retirement is something that is the most beneficial the sooner you do it. Unfortunately, retirement isn’t something on the top of many young people’s priorities, but perhaps it should be. Many companies have tight requirements on 401(k) participation and eligibility. If you’re never able to stay with a company long enough to take advantage of 401(k) benefits, then you’re losing out on valuable retirement savings. Some companies require an employee to be employed for a set amount of time before they offer matched retirement savings and, if you quit your position, you may not be able to take the matched benefits with you.
Fortunately, an employer 401(k) account is not the only option for retirement savings. If you do decide to job hop, you may consider contributing to a Roth IRA account that is independent of your employer. This way, you have the freedom to change your career as frequently as you need while not hurting your retirement savings. This type of savings may require more discipline and effort in maintaining, but it’s not impossible. Many people who are struggling financially, which is more common during periods of unemployment, sacrifice retirement in order to pay bills and maintain good credit. Thats a hard decision to make, and one you’d be better to avoid.
When making the decision to change careers frequently, it’s important to weigh the pros of your career search with the cons of sacrificing financial stability and retirement planning. However, finding the right career may be worth some sacrifices in the long run, but it’s a balancing act that requires a lot of decision making. The trend may be growing, but it doesn’t change the challenges associated with career changes on your finances.
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