Hardcore job hoppers change jobs every one-to-two years. Sometimes it’s necessary for a complete career change. Other times, a move can diversify experience, providing exposure to different perspectives and methods of tackling issues. It can broaden a professional network, create learning opportunities or even transplant you to a more desirable location. Also, a switch is often the best way to get a desired bump in pay.
All those reasons – and more – are valid. But, so is hitting the brakes and considering how job hopping may have unintended consequences on your financial future.
Losing out on retirement savings
If you’re job hopping, you may not have time to build significant savings in a workplace-sponsored plan, like a 401(k). Such a plan allows you to contribute to your retirement fund automatically with pre-tax dollars. Not only is it an easy way to save, but you’re reducing your taxable income for an immediate tax benefit. Many companies have a waiting period before eligible employees can participate, so you could be losing valuable time and dollars for your future.
If you do make contributions to a workplace-sponsored plan, they will be yours to keep and rollover; however, an employer’s contributions in matching funds are another story. Many companies have a vesting schedule, and with each year of service, you’ll get to keep a certain percentage of the company’s match. If leaving before becoming 100 percent vested, you forfeit any unvested balance.
Raising red flags when securing credit
An individual’s credit report includes an employment history, and lenders like to see stability when making a call on whether a borrower is a good risk. Gaps or short stints in employment may be viewed as a lack of commitment and can be problematic if they align with missed or late bill payments. While job hopping may not factor directly into a credit score, it could impact whether you get credit and at what terms.
Back to square one on health care
Every time you start a new job, you’ll need to start over with a new employer’s health care plan. Be ready for a change in doctors or providers as well as in rates. Additionally, any co-insurance or deductible payments already made under an old plan won’t count, so you’ll be starting from scratch when adding up out-of-pocket costs.
If your most recent employer was a company with 20 or more employees, you could hang on to coverage for up to 18 months through a federal law, COBRA. But it’ll cost you: you’ll be paying the entire premium and administrative costs for yourself, with no help from employers.
Did you use or will you lose?
Some employers offer use-it-or-lose-it benefits, and you may leave money on the table if switching too quickly. Benefits may include anything from time off to flexible savings accounts for medical, dependent care or commuter expenses. For vacation time, state law determines whether employers are required to pay for unused time, though some may have a policy to do so. With other benefits, like the flexible savings accounts, you may forfeit whatever funds remain at the time of termination.
Additionally, if you received a signing or relocation bonus upon joining a company, review the fine print of the agreement. Some may require repayment, in part or in full, if you hop to a new gig before a set date.
Putting future job searches in danger
While job hopping has become more accepted, particularly in certain STEM, professional services and media-related fields, there is a chance that too much movement could make employers think twice about taking you on. Some employers may wish to see more loyalty and commitment, or they may be concerned that there is little way to ensure job satisfaction so won’t extend an offer.
Be sure to get the most value from each job, such as by fully developing new skills and making new contacts. And be ready to explain why certain situations were not the right fit for you. By demonstrating a clear path for your career development, you can help alleviate a potential employer’s concerns and improve your chances of securing a regular paycheck.
Make a move with confidence
Switching jobs can be a great move, professionally and financially. Make time to understand what you’re leaving behind and whether your finances will take a hit rather than taking a leap of faith. With some preparation, you can feel confident that you’ll land on your feet.