5 Ways Changing Jobs Puts (Your) Retirement at Risk

  Changing jobs can be a time of great energy and excitement — but if you’re not attentive, it can also undermine your retirement security. Here are five ways it can do so.

Cashing It Out

Probably the biggest job change risk to retirement security is the rollover decision. Generally speaking, most with balances less than $1,000 are automatically issued a check of their savings minus income tax and 10% penalties, those with between $1,000 and $7,000 are given two other options to cashing out: to roll over assets into a qualified IRA or to transfer to a new employer’s plan, while those with balances over $7,000 also have the option to leave their account with that old employer plan.

As you might expect, smaller balances are not only the most likely to be those of lower income individuals, but they also tend to be lower tenured and are more likely to be women. Oh — and if that individual has an outstanding loan? Well, that’s where the real “leakage” occurs. Remembering of course that there will be federal and possibly state/city taxes netted against it, not to mention a 10% penalty for all that are less than 59 ½.

Sizing the impact of this leakage is complicated, but the Employee Benefit Research Institute (EBRI) has estimated that each year approximately 40 percent of terminated participants elect to prematurely cash out 15% of plan assets. For 2015, EBRI estimated that $92.4 billion was lost due to leakages from cashouts.

Putting It in a Money Market ‘Mattress’

Even those who manage to successfully rollover their balance to an individual retirement account (IRA) can lose out on retirement account growth. A 2024 Vanguard analysis notes that 28% of rollover investors stayed in cash for at least 12 months, with minimal changes after the first three months following the contribution.

More than that, the report notes that among rollovers conducted in 2015, 28% remained in cash for at least seven years — and explains that younger investors, women, and those with smaller balances (who, of course, are the same groups that are more prone to cashouts in the first place) are especially prone to staying in cash for years following a rollover.

Which these days is pretty much the same result as sticking in under your mattress.

Leaving It ‘Behind’

In view of the hurdles cited above, it should come as no surprise that some go with the path of least resistance — and for some that means just leaving your account where it is. In fact, there are some recent surveys that suggest that employers are not only fine with that, there is some preference for leaving those balances — particularly larger balances — in the plan where they originated.

That’s just fine — and may even be preferable for any number of reasons — so long as you keep up with it. That said, it’s the kind of thing that’s easy to lose track of — that old employer may change recordkeepers, necessitating a new website/phone number to access your account, changes in investment options that might impact your account, or even — certainly if the balance is small enough — you just forgetting that you still have an account there. All in all, EBRI has estimated that over a 40-year period, those accumulations might add up to $1.5 to $1.99 trillion.[i]

Regardless, leaving one — or multiple — retirement plan accounts with your prior employer(s) may be the easiest thing to do at job change. However, that can make it more difficult to manage your retirement savings — and there have been situations where “forgotten” accounts have fallen prey to online theft, in no small part because they haven’t been accessed in a while, or perhaps not at all following a provider change. Just don’t let “out of sight” become out of mind.

Settling for Savings Rate Resets

Consider a 2024 Vanguard study that found that, despite having an increase in income from a job change, many workers experience a substantial slowdown in savings. The median job switcher saw a 10% increase in pay, but a 0.7 percentage point DECLINE in their retirement saving rate when they switched employers. And while most job switchers (64% of the income sample) experienced a boost to their income, just 44% increased or maintained their saving rate from their prior job.

Most (55%) actually DECREASED their saving rate in their new job. Arguably not because they intended to, but because they simply drifted along with the default savings rate at their new employer. Even when they experienced a pay increase of more than 20%!

Taking a New Job Without a ‘New’ Plan

A new analysis by the Employee Benefit Research Institute (EBRI) finds that when a worker did have a retirement plan at a job, they were more likely to stay at that job compared with workers who did not have a plan. The report notes that, for example, in 1996, 76.8% of retirement plan participants were still at the same job they had had in 1994 compared with just 58.1% of those who were not retirement plan participants.

On the other hand, among workers who changed jobs from 1996–2022, an average of 43.8% moved from a job without a retirement plan to another job without a retirement plan, while an average of 20.9% had a retirement plan at both jobs.

That said, only an average of 15.3% gained a plan upon job change. while an average of 20% lost access to a plan via work.

All that said, perhaps the most encouraging statistic comes from a recent Schwab survey of stock plan participants — and while that might be an unusual subset, according to the survey, 82% of respondents consider a 401(k) plan a must-have benefit when evaluating a new job, surpassing health insurance coverage at 78%.

Because, as we know, access to a retirement plan at work is the very best way to help provide for a financially successful life after work.

In sum, when making a job change, you should:

1. Look for ways to avoid taking a distribution (and incurring the substantial taxes).
2. Look to see if the new employer has a retirement plan — and whether it permits rollovers or not.
3. Make sure your rollover balance is properly invested.
4. Make sure your savings rate in the new plan keeps pace with your previous — and perhaps more if you got an increase.
5. And while you’re at it — it’s a good time to do a retirement readiness check-in to make sure that the plans for retirement are current.

-              Nevin E. Adams, JD

[i] There have been some ridiculous projections as to how much this adds up to. The point is valid — the math, not so much. See The True 'Cost' of 'The True Cost of Forgotten 401(k) Accounts.'

'Micro' Managing

 I recently stumbled into a bit of controversy on LinkedIn. 

Honestly, I’m not even sure how this wound up in my “feed” — but there was a post from the Atlanta Journal-Constitution on the topic of “micro-retirements.”

Now, if you’re like me, you may be wondering — what the heck is a MICRO-retirement?  Turns out that, unlike actual retirement, it’s a series of multiple, intentional “mini-breaks” from work throughout life — rather than waiting until the traditional “big” retirement at the end of a career. 

Some of you are going to say — oh, we used to call that a sabbatical. Others might well see this as some kind of extended PTO or vacation break. But those, of course, are generally employer supported/sanctioned, whereas these micro-retirements presumably would not be. 

Oh, and none other than sidehustles.com[i] (who admittedly might be biased on the subject) claims that 1 in 10 Americans plan to take one this year.

That said, it’s actually not a new term, though I don’t remember hearing it previously. Said to be the latest Gen Z trend, the current label gained traction in the mid-2000s, especially after The 4-Hour Workweek by Tim Ferriss (2007), which popularized the idea of “mini-retirements” as deliberate breaks instead of a single retirement at the “end.”

This was positioned as folks working for an 8-10-year stretch — saving up enough money for — whatever — and then taking several months or a couple of years to do — whatever (travel to Asia, volunteer, write a book, etc.) funded by savings accumulated during the working stretch. And then you come back to the workforce — maybe a completely different field, maybe something related to the time you took off, or perhaps your “old” field, but rejuvenated, inspired, etc. 

The controversy, as you might expect, was between those who did a bit of eye-rolling at the notion of just walking away from work for random, extended periods of time and those who viewed those eye-rollers as some kind of 19^th century neanderthal throwbacks for their more “traditional” views about work. Oh, and interestingly enough, age didn’t really seem to be a factor in those responses (if only because LinkedIn seems to still be dominated by “older” voices — or maybe that’s just my feed).

People change jobs all the time — and employers often terminate employment of hundreds (and even thousands) of people with precious little opportunity to prepare. At some level then, people deciding to take an extended break from work shouldn’t be all that disruptive.  On the other hand, “covering” for folks who are on sabbatical, parental leave, or even vacation does put a strain[ii] on the rest of the team (though I know of instances where their extended departure was welcome!). In other words, managing micro-retirements would/is surely (be) … complicated.

We spend a lot of time and energy worrying about people not saving enough even after a 40-year career, and so the notion that you’d pull up, stop and spend (and spend money supporting) an extended period (months to a year) on life experiences[iii] — well, I can’t quite get my head around it. That said, the side-hustles survey says just over half (52%) of those who have taken one plan to return to their current employer. 

In fairness, I’ve never had a sabbatical — heck, I never even took time off between my job changes (I know, sick, right?) — and I am widely (though good-naturedly) razzed about my personal (and still “evolving”) version of “retirement.” 

So, I may not be the most open-minded on the subject. 

But what do YOU think?

• Nevin E. Adams, JD        

 

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[i] Who also claims that 1 in 8 Millennials (13%) and nearly 1 in 10 Gen Zers (9%) are planning a micro-retirement in 2025, and that 1 in 5 Americans (20%) have previously taken a micro-retirement, including 22% of Millennials and 17% of Gen Zers.

[ii] 38% of the respondents to the side-hustles survey admit it causes staff shortages and strain on companies, though 54% say it prevents burnout and improves well-being — ostensibly for the retirees, rather than those covering for their outage.

[iii] I was mostly working on my own “life experiences” like raising kids, paying a mortgage, going to law school (at night, while working) — and doing jobs that were VERY full-time on their own.

(Just Because) Survey Says?

 We’re often told (via surveys) of any number of retirement plan options that plan participants want. Should it matter?

Most recently, we’re assured that participants are clamoring to have access to private market investments. Before that, it was cryptocurrency — and for what seems like months now it’s all been about retirement income. Apparently vast majorities of participants are eager to have access through their 401(k) to an array of complex financial instruments to which they have, thus far, been largely (or totally) barred — or so surveys say.

Indeed, I’ve always been amazed that organizations are able to find so many ostensibly knowledgeable participants to weigh in on these complex topics — particularly since there is an abundance of (other) surveys that suggest that when it comes to financial matters, participants are, largely, clueless.

Not that that seems to dampen their collective interest in these new options — though when given a chance to put their money where their mouth is, participants seem to be about as cautious as you’d expect (want?) largely financially clueless individuals to be.  Doubtless the questions posed in these survey instruments are less complex than the actual decision points turn out to be.   

So, why bother asking participants what they (think they) want in the first place?

It’s not that there isn’t value to be gleaned in assessing participant sentiment but — as noted above, the actual take-up rate on those products, even when offered by a plan, has traditionally been…disappointing, certainly from the standpoint of the manufacturers of those offerings.

Manufacturers that, it bears noting, inevitably turn out to be the sponsors of these surveys claiming that participants want what they rarely seem to take. That doesn’t make them irrelevant, of course, nor does it mean that the results are hopelessly biased — but it is, I would argue, worth some caution in blindly embracing (or sharing) the results, even when a reputable canvassing body is involved. At a minimum, a visible footnote acknowledging that specific “interest” in the outcome seems warranted.

The reality is that these types of surveys are rarely designed to actually gauge participant interest — savvy product manufacturers have likely already done some of that alongside the inevitable market and profit margin projections. Rather, they are a means to create and/or fuel public awareness, but perhaps more specifically to encourage plan sponsor/fiduciary consideration on the path to the ultimate acceptance of options they might otherwise be disinclined to entertain.

Prudent plan fiduciaries should, of course, take note of such things — but arguably with a grain of salt, certainly as it pertains to their specific workforce. However fervent the interest of a group of unrelated individuals might be, that doesn’t make it relevant for those under your care.

Indeed, ERISA’s standard of care is a high threshold, one that requires that the services engaged not only be reasonable in terms of fees and applicability, but solely in the best interests of plan participants and their beneficiaries.

And, as any parent can attest, sometimes those in our care want things that don’t meet that standard, whatever their opinion may be at the time.

Regardless, plan fiduciaries shouldn’t feel coerced into incorporating options just because a sponsored survey says (some) participants want it — participants who, of course, might not know what they’re asking for. Because, after all, prudent plan fiduciaries are expected to.

- Nevin E. Adams, JD

The Hassle(s) With Student Debt Matching

 Despite a lot of enthusiastic support for SECURE 2.0’s qualified student loan matching provision (QSLP match), employers don’t seem to be adopting that provision. Maybe there’s a reason — or two.

Recently only 12% of sponsors answering Callan’s annual DC survey said they had decided to offer employer-retirement account matches on qualified student loan payments, while 49% said no and 39% said they were still deciding — and that’s a survey that skews toward larger plans, generally viewed as early adopters.

Those tepid numbers have been validated in several reader polls conducted by the Plan Sponsor Council of America (PSCA). In 2023, only 2.2% of respondents said they offer or will offer the program during the year. In 2024, it was 4.7%. In the January 2025 poll covering 154 responses, the adoption rate was just 2.6%. Oh, and the “no” votes over the years were, shall we say, “emphatic”: 66.2%, 64% and 74.7% respectively, according to Pensions and Investments.

While I understand and appreciate the impact that college debt can have on retirement savings, I’ve never been a big fan of this particular provision (albeit voluntary) of SECURE 2.0. My ambivalence[i] was borne out of a sense that I saw no reason to set out college debt for special treatment. It is, after all, a financial obligation willingly undertaken — but then, so are things like a mortgage, a car payment, or even rent. And data suggests that those taking on the biggest burden are either from higher-income households, in pursuit of professions that will result in higher incomes (law, medicine), or both.

Despite those concerns, much was made of the need for this provision, and there was a LOT of enthusiasm in the industry and industry press both prior to, and when it was included in SECURE 2.0. 

So, what happened?

Well, any number of things, surely — but I figured it was going to stall out when I first saw IRS Notice 2024-63, the aptly titled “Guidance Under Section 110 of the SECURE 2.0 Act with Respect to Matching Contributions Made on Account of Qualified Student Loan Payments.” 

Don’t get me wrong — I feel like the drafters of that guidance bent over backwards to try and make it easy for those with student debt to take advantage of the option. But at the same time, when you consider the administrative work that would need to make this a reality…

So, first off, we’re not just talking about the employee’s debt — and while it has to be something THEY are legally obligated to pay, it could be theirs, their spouses, or for a dependent. Those payments have to be made within the calendar or plan year in which they occur, and they are — as one would expect — subject to the 402(g) limits ($23,500 in 2025). So presumably those payments are impeding THEIR savings availability. Presumably.

The guidance allows the plan sponsor to take the employee’s word for it — well, at least in the form of an annual certification from the employee[ii] with regard to the amount, payment date, and loan classification, etc. Most of this on annual basis (hassle #1 — see footnote 2 for a potential hassle #2), though technically a plan can impose a reasonable deadline or deadlines for a participant to claim the match (three months after the end of the plan year is deemed “reasonable”). As a practical matter, this means the match cannot be made on a payroll basis, which many employers prefer — so, hassle #3.

Oh, and while there are provisions for a separate ADP/ACP test, that remains a timing issue (hassle #4). What do you do if someone terminates after they’ve made loan repayments, but before you’ve made the match? That would be hassle #5. Oh, and can the employee — if the plan allows workers to designate employer contributions as Roth — request that these matches be Roth as well? Well, yes, as it turns out — but if the employer has already allowed for this option — well, they’re already familiar with that “hassle” (#6).

And then, for plan years starting after Dec. 31, 2023, employers can offer the QSLP match to any employee eligible to participate in the DC plan, even if the employee isn’t contributing to the plan. Which might be another hassle (#7, if you’ve lost count). See where I’m going?

Over the past couple of years there’s been a tendency (if not a trend) to leverage the success of the 401(k) to solve or ameliorate a number of larger financial concerns (emergency savings, retirement income, financial wellness). I get it. One of my favorite aspects of SECURE 2.0 was how many of its provisions were optional — and employers are, thankfully, free to construct their benefit programs in ways that allow them to attract and retain the workers they need in the ways that make sense, and to take advantage of the tax laws to do so.

That said, I’m not surprised that a plan sponsor who has sat down with their advisor and their recordkeeper might well consider implementing a student loan match program to be more “hassle” than it’s worth. 

I guess I’m most surprised that some are trying to make this work, regardless.

• Nevin E. Adams, JD

 

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[i] For a more comprehensive exposition, see What's So Special About College Debt?

[ii] One of the concerns I have heard from plan sponsors is what happens when somewhere down the road it turns out the information provided by the employee turns out to be wrong, and corrections are required? Well, as it turns out, Q&A E-4 provides that the plan is not required to make a correction. 

Perception Gaps

  A recent survey “revealed” a big disconnect between participants and plan sponsors — or did it?

The survey, conducted from mid-January to mid-February earlier this year by Voya, found that while 91% of sponsors thought participants were either very or somewhat prepared for retirement, “just” 69% of participants felt that way. A finding that I think it’s fair to say surprised — well, probably no one. 

Indeed, I’m sure there are any number of advisors out there who saw this as an opportunity to tell plan sponsors that while they may THINK the participants they serve and support are in good shape, their reality may be different. Particularly since this survey also found that advisors’ perspective was pretty much aligned with that of the participants surveyed.  

But could plan sponsors’ “read” of participant readiness really be so strong as to be so out of touch with participants’ perception? The authors of the report opined that the bull market might explain the level of plan sponsor positivity (which apparently is a consistent finding), though elsewhere in the report it cites that market volatility has been a factor of concern for participants — and so, one might suppose that, depending on when you responded to the survey, you might be inclined to feel better — or not — depending on the state of the market at the time (in fairness, the authors note that participant confidence has INCREASED since 2023, up from 63%). 

But as I thought about the data — or rather the conclusions drawn there — I noted that these are separate surveys of participants and plan sponsors — not just in time, but in…location. These are NOT the participants in the plans overseen by these specific plan sponsors, and these participant sentiments expressed are from participants not under the guidance/purview of the surveyed plan sponsors.[i] Perhaps if the plan sponsors associated with these particular participants’ plans were surveyed, they’d have a more muted confidence. Similarly, if the survey focused on participants in the plans overseen by this particular group of plan sponsors — well, they might actually be in a better situation, and thus more confident.

But even then, there’s a high likelihood that the vast majority of the participants surveyed have NEVER made even a single attempt to figure out their retirement needs/target,[ii] and so when asked about their level of confidence … well, it’s pretty likely to be an “uninformed” assessment. You can, of course, be confident — or lack confidence — for no good reason.  And who’s to say that the evaluation of the plan sponsors — who may have no specific sense of the retirement needs of their participant base — is any more credible?

Let’s face it — a macro view of the plan’s participant readiness (not to mention that some plan sponsors are more cognizant of such things than others) is almost certainly going to vary from the micro perspective of an individual. It’s not quite apples and oranges, but it’s at least comparable to assessing the quality of a bushel of apples compared to a couple at the bottom of the basket.

Beyond that, when you look inside the numbers of the Voya survey you see that just 17% of participants considered themselves VERY prepared — and only 27% of plan sponsors characterized their participant readiness as “very” prepared. So, while there’s a perception “gap,” it’s not as wide as the headlines proclaimed. 

All this by way of saying that while there is value[iii] in comparing (and contrasting) the perspectives of plan sponsors and participants from different places, at different times with different levels of understanding and evaluation…

Well, it’s a good idea to keep those differences in mind — particularly when trying to close those gaps in perception.

• Nevin E. Adams, JD     

 

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[i] I suppose some accidental overlap IS possible, but it seems unlikely.

[ii] If that question was asked, it wasn’t obvious from the results. Again, while confidence readings are easy to take, if you have no idea what you need (and perhaps a dated idea of what you have), I would argue it’s of little use in terms of gauging reality.

[iii] And, dare I say, click-throughs…

A ‘Better’ Than Averages Report

 There were some good headlines about 401(k)s last week — but the numbers underneath those “averages” were even better.

Those headlines — reporting on Fidelity’s Building Financial Futures: Q1 2025 report — noted that savings rates hit a record high in Q1, driven by a milestone employee contribution rate of 9.5%, and an employer contribution rate of 4.8% — the highest level to date in that survey. Those types of increases have previously been noted in surveys by the Plan Sponsor Council of America, but this one commented that the combined savings rate of 14.3% is the closest it’s ever been to Fidelity's suggested savings rate of 15%. 

That said, when you look inside those averages — Fidelity noted that Boomers[i] actually had a total savings rate of 17.2%, buoyed by a 12% employee savings rate, while Gen Xers had a 15.4% total savings rate (a 10.3% employee savings rate). Gen Z’s 7.3% employee savings rate and Millennials’ 8.8% rates — although robust for their life stages — actually dampened the “averages.”

Not as widely covered was that 17.4% of participants increased their contribution rate during the quarter (though 4.9% decreased it) — but here it was the younger generations leading the way, with 19.2% of Gen Zers and 18.1% of Millennials upping their “ante.” And while, on average, 61.9% had all their money invested in a target-date fund, that was 81% of Gen Z, but just 44.6% of Boomers. 

‘Average’ Bearings

All of those results, of course, are “averages” — though they are at least segmented by demographic groups that mitigate at least some of the distortions in the broad average.  

To their credit (and the positioning of Fidelity in their press release), most of the industry trade press focused on the increase in savings rate. Unfortunately, most of the “regular” press chose instead to headline the part about a drop in the average balances attributed to market volatility (3% in 401(k)s and 4% in 403(b)s). But while we’re on the subject of “averages,” while the “average” 401(k) balance[ii] at Fidelity was $127,100 — the “average” for Boomers was nearly twice that ($239,600).

Look, that “average 401(k) balance” includes a broad array of circumstances: participants who may (or may not) have a DB program, who are of all ages, who receive widely different levels of pay, who work for employers that provide varying levels of match, and who live (and may retire) in completely different parts of the country (and who experience very different costs of living). “Averages,” as “easy” and tempting as they are mathematically, can obscure — and even distort — those very significant differences. 

Which is why — when it comes to assessing reality — it’s better to look BEYOND the “averages.”

• Nevin E. Adams, JD

 

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[i] Generations as defined by Pew Research: Baby Boomers are individuals born between 1946 – 1964, Gen X are individuals born between 1965-1980, Millennials include individuals born between 1981 – 1996 and Gen Z includes individuals born between 1997 – 2012. 

[ii] That said, here are some points to keep in mind when trying to discern trends from “averages”: Why an Average 401(k) Balance Doesn't 'Mean' Much.

Between a Rock and a Hard Place

  Plan fiduciaries might well have gotten a case of severe whiplash last week.

I’m referring of course to the dual announcements from the Labor Department (a) rescinding its previous position on cryptocurrency in retirement plans and (b) indicating  that it in some fashion plans to review/change the current so-called ESG rule through a formal regulatory notice-and-comment period — presumably rather than defend the current version which had been challenged in court. That, and any day now it’s expected that the Administration will (similarly) soften, if not shift, its previous take on private equity investments in defined contribution plans.

Doubtless many are cheering these new developments; others, of course, will see this as either a danger, or a diminution of fiduciary responsibility. And some, surely, will like one, but not the other. 

Regardless, if you’re a plan fiduciary trying to figure out what is right and prudent to consider as plan investments — well, by any rational measure these shifts are abrupt, if not contradictory in effect if not purpose.   

Now, admittedly the world has changed since the Labor Department first staked out positions on these matters — markets have matured, definitions (notably ESG) have “evolved,” and while time inevitably allows us to review past experiences in a different light — we all know what has actually happened is that the Trump Administration looks at the world of retirement plans (and markets generally) differently than the Biden or Obama and even the Bush Administration(s). And even if the standards of conduct established by ERISA haven’t changed, the application of those standards apparently has. Yes, over the course of time and experience, as you would hope/expect, but more accurately over the course of change in administrations.

Worse, we live in a time when the plaintiffs’ bar — without a hint of irony — manage to find fault both with failing to add a stable value option, and the decision to add one rather than a money market alternative, to challenge as imprudent target-date funds that don’t mirror the (different) glidepaths of the rest of the “pack,” or to claim that following the legal terms of the plan document in forfeiture dispositions runs afoul of one’s fiduciary obligations. 

Add to that the growing industry chorus that a less-than-active consideration of mechanisms like in-plan retirement income constitutes a failure to consider “best interests” — and it’s no wonder that prudent plan fiduciaries feel themselves stranded in the middle of a “damned whether you do – or not” minefield.

The reality is that plan fiduciaries have always had to thread a needle of sorts; trying to act solely in the best interests of participants on matters in which they often lack the requisite expertise to make that evaluation — and in matters for which they bear personal responsibility. It’s why many do — and all arguably should — tap into the insights and experience of those who have that expertise. 

But in this “rock and a hard place” environment, you can’t fault plan fiduciaries for choosing to avoid or defer making big changes in plan design when the rules — and rule makers — change so abruptly.

• Nevin E. Adams, JD