Latest / Job Hopping with Fexingo: Tenure, Loyalty, and the Modern Career Resume / How Job Hopping Changes Your 401k and Retirement Savings
Transcript
- Lucas: Let's talk about something that doesn't usually come up when people debate job hopping: your 401k. Or more broadly, how short tenures affect retirement savings. Luna: Because everyone focuses on the salary bump, but the match and the vesting schedule — those are real money too. Lucas: Exactly. I pulled some numbers from Fidelity's 2025 data. The average 401k match is about 4.6 percent of salary, and most companies use a graded vesting schedule — typically 20 percent per year over five years, or a cliff at three years. Luna: So if you leave after two years, you might walk away with zero match on the employer contributions you earned. Lucas: Right. And if you're a job hopper with, say, six employers over a 30-year career, your average tenure is about five years. That means you might fully vest at some places but not others. Vanguard did a study in 2023 — they found that workers who change jobs every two to three years forfeit about 12 percent of their total match contributions over a career. Luna: Twelve percent — that's not nothing. But it's also not catastrophic if your salary is growing fast. Lucas: That's the tradeoff. Let's run a concrete example. Say you start at $60,000. Loyalist stays for 30 years, gets 4 percent raises annually. They end at about $195,000. Total match over 30 years at 4.6 percent — roughly $180,000 in employer contributions, fully vested because they never left. Luna: And the job hopper? Lucas: Job hopper switches jobs every three years — ten moves total. Each move gets a 15 percent salary bump. Starting at $60,000, by year 30 they're earning about $243,000. Total match contributions are higher because their salary is higher — around $220,000 in contributions. But they forfeit maybe 20 percent of that due to unvested matches at shorter tenures. So net match is about $176,000. Luna: So the hopper actually comes out slightly behind on the match itself — $176,000 versus $180,000. But their salary is way higher. Lucas: And that higher salary means they can contribute more of their own money. Plus, they have more to invest. If they each save 10 percent of salary plus the match, and earn 7 percent annual return, the loyalist ends with about $2.1 million at retirement. The job hopper? About $3.2 million. Luna: Wow. So despite losing some match money, the salary growth more than compensates — by a lot. Lucas: By a million dollars. The key is that the salary bumps compound because they're based on a larger base each time. And the match, while nice, is a smaller fraction of total compensation than most people think. Luna: But that math depends on actually getting those big raises. If you're hopping for lateral moves or small increases, the advantage shrinks. Lucas: Absolutely. If your raises are only 5 percent per move, the loyalist actually wins. So the strategy only works if you're negotiating aggressively. Also, there's the rollover problem. Luna: Meaning people forget to roll over old 401ks and end up with a dozen small accounts charging fees. Lucas: Exactly. A 2024 study from the Employee Benefit Research Institute found that 41 percent of job changers leave their old 401k with the former employer. Those accounts often have higher fees and lower returns. If you do that ten times, you're losing maybe 0.5 percent annually on a chunk of your savings — that adds up to tens of thousands over time. Luna: So the fix is simple: roll over every time you leave a job into a low-cost IRA or your new 401k. Lucas: Simple but not always done. And there's another angle: vesting schedules vary hugely by industry. Tech companies often have three-year cliff vesting. Financial services tend toward five-year graded. So a job hopper in tech might lose match from year one and two, while in finance they'd lose a prorated amount after two years. Luna: Which means you should factor vesting into your decision when considering a job offer. If Company A offers a 5 percent match with five-year graded vesting, and Company B offers 3 percent match with immediate vesting, the math might favor B if you plan to leave within two years. Lucas: That's a great point. I think the broader lesson is: don't ignore retirement benefits when evaluating a job hop, but don't over-weight them either. The real driver is salary growth. A higher salary lets you save more, and that compounds. Luna: And if you're a serial job hopper, make sure you're rolling over those 401ks and maybe even increasing your own contribution rate to offset any lost match. Lucas: Exactly. One more thing: if you're at a job with a pension — rare but still exists — the math is completely different. Traditional pensions are usually based on final average salary and years of service. Leaving early can dramatically reduce your pension benefit. That's a whole other episode. Luna: We should do that one. But for now, the takeaway: job hopping can still be great for retirement, but you have to be intentional about the mechanics. Lucas: Right. And speaking of being intentional — this show stays ad-free because of listeners who chip in a few bucks. If these career episodes have helped you think through a move or a negotiation, you can support us at buy me a coffee dot com slash fexingo. It genuinely makes a difference. Luna: Yeah, even a couple dollars a month keeps the lights on. No pressure, but if you've gotten value, it's a nice way to say thanks. Lucas: Alright — back to the numbers. One final comparison: let's say you're 30, making $80,000, and you get an offer for $95,000 at a new company with a 4 percent match that vests over four years. Your current job has a 5 percent match that's already fully vested. Should you take the new job? Luna: I'd run the numbers. The salary bump is $15,000 — almost 19 percent. But you'll lose the first year of match at the new place if you leave before one year. Lucas: Right. But even accounting for that, the higher salary means you can contribute more. Over a 30-year career, that $15,000 bump alone — even if you never get another raise — would generate about $150,000 in additional retirement savings at 7 percent return. Luna: So unless the match difference is enormous, the salary almost always wins. Lucas: Almost always. But there are edge cases — like if you're close to retirement and the match is a big chunk of your savings. Or if the new job has a worse 401k plan with high fees. Luna: So the rule of thumb: prioritize salary growth, but don't ignore the retirement details. And always roll over. Lucas: Words to live by. Next time we'll dig into how pensions interact with job hopping — that's a big one for anyone in government or union jobs. Luna: Looking forward to it. Lucas: I'm Lucas. Luna: And I'm Luna. Lucas: See you next time.