What guidelines are accepted for how to save/invest in company-contribution savings programs such as 401Ks when the person changes jobs every 2-5 years? Are strategies different than when you expect to invest in the same 401K (or similar vehicle) over 10-15 years? What do you need to know in terms of rolling savings from one employer plan to the next (or should you keep a bunch of pots going)?

I think such info is very pertinent for the young investor, who may not be taking advantage of an employer’s savings plan because they know they’re only going to be at a job for a couple years (or less) and think its not worth the hassle of investing, or don’t understand what the benefits are, even in the short term, of employer matches, etc. (Many of my friends are doing exactly this.)

Ancillary to this is that some young investors do take advantage of an employer savings program, but then don’t understand that it can roll into the new employer’s program, and thus the old employer “cashes out” and the investor gets a check for the remaining amount after those insane taxes. (This recently happened to my fiance with his 401K; his employer cashed it out before he could roll it. I check the mail, I never saw literature from the employer about rolling/transferring, so I am not even sure they gave him a heads up.)

In the changing job market, where permanency in a position is a thing of the past, understanding the level of fluidity in employer savings programs could be beneficial.

Alissa Genovese 
Program Operations Specialist 
Office of Research and Evaluation

May 13, 2010

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