Top 4 Ways to Save for Retirement as a Job Hopper Now

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Young adults seem to have no problem “hopping” from job to job in search of better opportunities and higher pay. But, is job-hopping really worth it if you’re potentially hurting your retirement savings? Whether you’ve recently graduated from college or you’re in the middle of a late-career job transition, it’s important to be aware of the upsides and downsides to job-hopping.

While higher pay, better benefits, and cooler workplace perks may be advantageous to some workers, the trade-off of lower job security and fewer opportunities to save for retirement may not be worth it for a lot of folks. People already tend to struggle with saving for retirement. A 2016 survey found the average Baby Boomer has just $147,000 saved for retirement, while the average Millennial has about $31,000.

If you want to make sure your golden years are financially secure in spite of your job instability, then here are 4 easy ways to save for retirement as a job hopper.

Save for Retirement as a Job-Hopper

Contribute to a Roth IRA

One of the biggest retirement planning mistakes you can make is assuming someone else will handle it for you. Unfortunately, Social Security paychecks can barely cover most Americans’ basic living expenses, and without a lifelong employer, how do you expect to accumulate a significant savings with an employer-provided 401K?

If you’re currently dealing with an unstable job situation, then contributing regularly to an IRA is your best bet for saving for retirement. You can contribute up to $5,500 per year to a Roth IRA and withdraw the funds after age 59 ½ tax-free.

A Roth IRA is ideal for freelancers, temp workers, independent contractors, and self-employed individuals. But, you can also contribute to your IRA in addition to a 401k account, so don’t limit your contributions to when your job situation is rocky. Regular contributions are essential for anyone who wants to ensure they have enough money saved upon reaching retirement age.

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Maximize 401(k) Employer-Matching Opportunities

If you happen to get a job with a company offering 401(k)s to their employees, then take advantage of this retirement saving option as soon as possible, even if you don’t plan on staying with the company long-term.

Investing in a 401(k) is an excellent opportunity to quickly grow your retirement nest egg, especially if your employer offers matched contributions up to a certain amount. Typically, employers may match anywhere between 3-5% of your contributions.

However, if you’re planning to leave the company within a year or two, make sure you understand the terms and conditions of employer-matched 401(k) contributions. In some cases, you may be unable to keep your employers’ contributions if you’ve only worked for the company for a short period of time.

This shouldn’t stop you from trying to save as much money as possible in your 401(k), but it’s nevertheless important to be aware of. It might convince you to stay in that job a little longer than you initially planned to!

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401(k) Rollovers

If you want to make retirement planning less stressful, then it’s important to keep track of all your savings and investment accounts. When you leave a former employer, you can choose to either leave your company-provided 401(k) as-is or roll over the funds into a new account. Since job-hoppers likely have two or more 401(k)s, it can be difficult trying to manage all of your retirement accounts separately.

To simplify your retirement savings management, you may opt for a 401(k) rollover into a new IRA or 401(k). Your new employer’s 401(k) plan may offer lower account management fees, and your earnings will remain tax-deferred until the time comes when you withdraw the funds.

Rollover your 401(k) retirement plan with M1 Finance.

Invest on the Side

If you’re primarily relying on Roth IRAs to save for retirement, then you probably realize that saving $5,500 maximum per year likely won’t be enough to fully fund your post-working lifestyle. Consequently, you’ll want to start investing more, whether you try out a regular investment account with robo-advising companies like Betterment or get involved in peer to peer investing.

If you invested just 10% of your income each month, imagine how much money you’ll have saved up when you finally reach retirement!

Reasons Being a Job Hopper May Not Work for Your Career

Being A Job Hopper May Not Work For Your CareerAccording to research conducted by the Harvard Business Review, a whopping 21% of Millennials left their job within the last year to pursue other opportunities. This rate is three times higher than the rate of job-hopping – defined as moving around to different jobs within a short timeframe as opposed to staying in one position long-term – reported by older generations. But, is job hopping right for you? Do the pros outweigh the cons as a job hopper? Is the grass always greener at the next job? It may not be.

The phenomenon of job-hopping seems to be the new normal, but why younger workers are switching employment paths more frequently than previous generations? Surely it must be more than just a generational mentality shift? The Harvard Business Review study says that 71% of Millennials surveyed had reported a lack of engagement or even “active disengagement” with their current lines of work.

71% of Millennials surveyed had reported a lack of engagement or even with their current lines of work.Click To Tweet

Dissatisfaction with one’s job or the company culture, low wages, boredom in the workplace, and the perception of stagnant job advancement are just some of the many reasons why job-hopping is increasingly prevalent in today’s economy.

Pros and Cons of Job Hopping and Being A Job Hopper

If you’ve struggled with the decision to stay or leave your current job, or perhaps you’re worried about how hiring managers might view a resume with lots of short-term positions instead of long-term loyalty to one or two companies, then here are some pros and cons of job-hopping to consider.

Pro: Find Better Opportunities Elsewhere

When the economy was in a recession, voluntarily quitting an otherwise stable job would have been madness. But now that the economy has been improving slowly but surely since 2011, quitting a job to find a higher-paying job elsewhere is not uncommon, CNN Money reports.

Millions of Americans who are not exactly fulfilled in their current positions may leave for a more flexible, better-paying, or superior role to what they currently have because a stronger job market allows this moving-up-the-ladder strategy to succeed.

Millennials and other job hoppers already experience comparatively lower wage rates. So, there seems to be a greater financial incentive to jump on the job-hopping bandwagon and switch jobs more often to quickly increase their income.

The idea of favorable opportunities beyond your current job is not unique to any one generation, and the primary purpose of most job hoppers is to increase their pay, find more flexible jobs suited to their unique living situations, and eventually land a long-term career. Job hoppers want a career that not only fulfills all these requirements but also provides a reasonably high level of job satisfaction.

Staying with one company for one’s entire career is less important with each new generation. According to PwC’s report, “Millennials at work: Reshaping the workplace,” over 25% of Millennial employees who responded to the survey reported that they expect to have 6+ employers over the course of their careers (compared to just 10% of Millennials reported in 2008).

Furthermore, just 18% of Millennials in the PwC survey expected to stay with their current employers long-term. That indicates that job-hopping as a means to find better opportunities elsewhere will only become more prevalent in the years to come.

Con: A Job Hopper Lacks Stability

Just because job-hopping is an increasingly popular workforce trend does not mean it doesn’t come without its disadvantages. Job stability and the potential for future hiring managers to frown upon a scattered employment history are two of the biggest concerns employees have when considering multiple job switches in a short timeframe for job hoppers.

According to an article from the Wharton School at the University of Pennsylvania on declining rates of company loyalty among employees, today’s employers still value company loyalty, but today’s workers are less inclined to pledge their working lives to a single company if they are not socially engaged, financially rewarded, or productively satisfied in their current work environment.

This disconnect between employers and employees on the issue of loyalty has external consequences for job hoppers with a handful of short-term jobs on their resumes. A research-infused infographic on job-hopping from Bullhorn Reach illustrates that 39% of job recruiters in the survey reported that job candidates with a history of job-hopping faced serious obstacles to regaining employment because of their sporadic work record.

39% of job recruiters say job candidates with a history of job-hopping faced serious obstacles to employment.Click To Tweet

What does this mean for you? For one, companies may be less willing to go through the hiring and training processes if they suspect you may leave within a year or two as a job hopper.

Secondly, job-hopping is simply not viewed favorably by hiring managers and recruiters because a quantity-over-quality resume demonstrates a lack of commitment to one’s long-term job prospects. HR’s perceptions, whether or not they are accurate for your situation, can create career instability for you, which is especially concerning because neither job stability or job satisfaction are ever guaranteed.

Pro: Create More Outside Contacts Job Hopping

If job-hopping were laden with disadvantages, then nobody would be doing it, right? Despite the potential job instability factor, the possibility of finding better opportunities and the ability to create a greater network of contacts throughout an industry are driving factors behind the job-hopping movement.

A May 2016 Gallup poll found that 36% of Millennials report that they’ll look for a new job over the next 12 months if the job market improves, which is a considerably higher figure than the 21% of older workers that reported the same mentality.

Actively looking for new jobs requires applying and contacting other organizations, which builds the jobseeker’s network, beefs up their LinkedIn connections, and creates an ever-expanding circle of contacts who could potentially offer the job hopper a better opportunity than the one their current employer offers.

As the old adage goes, it’s not what you know, it’s who you know. Job-hopping could give you access to contacts you never would have encountered if you stayed within the confines of your current company and its employee base.

Con: Complicates Networking Within the Company

The downside to looking for and starting a new job every year or so is that cementing meaningful relationships with colleagues and employers is significantly more challenging. Quitting your job for any reason might lead to burned bridges with your coworkers and former boss, and if it turns out that the grass was greener on the other side and you want your old job back, it could be extremely difficult to convince them to rehire you.

Also, building relationships within your workplace is not just for the sake of career advancement. Forming friendships with colleagues and a steadfast partnership with your supervisor can affect your job satisfaction, whereas working with new people every year or two may diminish your ability to network beyond a superficial, temporary level.

Pro: Learn New Skills and Different Perspectives

Another huge benefit to switching companies and jobs before ultimately settling on a “career-oriented” position (if that ever happens) is that you can learn new skills and expertise in different job positions from a variety of employers. After all, nobody shares the same perspective and methods on everything, even if you work in a tight-knit, highly specialized industry.

For example, an April 2016 data analysis conducted by LinkedIn found that creative industries – media and entertainment – experienced the highest rate of job turnovers (job-hopping likely at play here), which indicates that employees learn what they can from one employer then move onto another higher-paying or flexible job with their newly-acquired skills.

An interesting side note: The LinkedIn analysis found that job-hopping is more prevalent among women than men.

With the exception of knowledge protected by non-disclosure agreements, you can present yourself to potential employers as an incredibly diverse and valuable employee when you have a history of job-hopping with reputable companies on your resume.

Con: A Job Hopper Can Potentially Lose Benefits

If you’re an independent contractor, then the potential loss of benefits experienced by job hoppers is non-unique to your situation. However, if you’re a steady employee accruing vacation days, sick pay, 401(K) funds, stock options, and other company-specific benefits, then job-hopping could erase these benefits and bring you back to square one.

For example, many companies do not allow new employees to immediately earn vacation days, which means a serial job hopper (one who switches jobs every 12 months, hypothetically) is losing out on vacation day and sick pay accruals for 30-90 days each year (depending on how long you have to work for a company before these benefits kick in).

Also at risk is your company’s health insurance plan. Who wants to risk losing health coverage in the midst of a job change? – and your 401(K) or pension plan, as well as employee stock options.

Although the general market trend seems to be decreasing rewards for loyal employees, these benefits are immeasurably valuable to long-term employees who can later cash out while their job-hopping peers struggle with job insecurity and a dearth of benefits.  

Job-hopping is not a new trend, but it’s surprisingly way more popular nowadays than in previous generations. As today’s economy proves more difficult to “have it all” in one’s job, more and more workers will continue to look elsewhere for higher wages, better benefits, more flexibility, and better contacts.

Job-hopping is not intended for folks who prioritize job stability above all else, but if you’re willing to risk a potential loss of benefits and long-term job security in favor of climbing the ladder with multiple jobs in a short period of time, then job-hopping may be what you’re looking for.

Careers That Reduce Job-Hopping

Changing jobs is an expected career move. However, young generations, and especially Millennials, have developed a reputation for rapid and constant changes, leading to the creation of a new term: Job-hopping. Job hoppers, as it happens, pursue a variety of opportunities, from moving their career forward to looking for a better team.

As a result, recruiters are becoming increasingly careful when they receive resumés. Nobody wants to invest in an employee who will be gone before the end of the year!

However, if as a Millennial, you’re looking for an adventurous position that lets you pursue your career aspirations through geographic or hierarchic moves, the prospect of reducing job-hopping is counterproductive. But there are, nevertheless, some professional sectors that encourage movement without changing jobs.

Millennials are job-hoppers: Pros & cons

From an employee’s perspective, job-hopping lets you find better opportunities so that quitting a job to find a higher-paying position elsewhere is not uncommon. However, from an employer’s perspective, job-hopping makes your employment history appear unstable.

In fact, 39% of recruiters think it is an obstacle to finding your next job. In the long term, you lack contacts within companies, and you can lose the benefits of a long-term position – 401(K) funds, accrued vacation days, etc. You need to move towards a career that offers the same diversity of job-hopping without changing employer.

Healthcare sector

The healthcare industry offers a variety of functions within the same institution. Indeed, you can train as a nurse through the MSN program online and gradually move your career forward through specialization and increased experience.

Indeed, as you work within a busy environment, you will find that there are a lot more opportunities to change jobs in the same hospital, which lets your shifting responsibilities and teams without leaving your employer. Comparatively speaking, you won’t find the same kind of choice in a company.

Business consultant

There are two main reasons why people decide to apply for a new job: Either they want to earn more, or they want to work with a different team or manager. If you embrace an independent career as a business consultant, you can fulfill your desire for change without switching jobs.

Indeed, as a business expert, you can get to work on a variety of projects, from strategy to project management for multiple clients. As you gain more experience through the process, you can also add new services or charge more for your skills. It’s a valuable position in which every day can be different!

Embassy clerks

Last, but not least, if you enjoy traveling and working in a new environment as often as possible – another common reason for job-hopping – you should consider taking a role in an embassy. Indeed, the embassy of the United States employs predominantly American citizens all over the world as well as a handful of locals.

Joining this institution lets you work abroad without changing employer, which is the best of both worlds. You can also discover new cultures and learn a new language as you are assigned to different regions.

There is a growing need for companies to embrace job-hopping. Candidates don’t want to stay in the same position. They want to move their career financially, professionally and geographically. Choosing sectors that encourage career progression without changing employers is the best solution to the uncertainties of job-hopping.

Successfully Saving for Retirement as a Job-Hopper

Being a job-hopper is tricky business. There’s not much job stability, no guarantee of better workplace relations with your new coworkers, and more obstacles preventing you from saving as much money for retirement as possible.

However, even with these barriers, you can clearly see that saving for retirement is totally doable for anyone who frequently switches jobs instead of staying with the same company for several decades. It won’t be easy at first, but with some careful research and planning, you can successfully save for retirement just like a regular lifelong employee.

What about you? Do you like job hopping? Do you think the pros outweigh the cons as a job hopper?

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