THERE’S BEEN MUCH talk in 2021 about the future of work, with a big focus on remote and hybrid office arrangements. But I’m more intrigued by another major trend: job hopping. Each month, labor economists get a fresh read on the pace of hirings, firings and quits. In fact, the “quit rate” has become a household term in 2021, as workers change jobs to snag higher pay.
That got me thinking about conventional personal finance wisdom, which says that employees should contribute as much as possible to their 401(k) plan. Capturing the employer’s matching contribution is a must, or so say nearly all personal finance gurus.
That’s still good advice today—but maybe not tomorrow. I believe companies will put in place crafty incentives and clauses to retain employees. Perhaps stretched-out schedules for vesting on 401(k) matching contributions and stock options, as well as for receiving student loan payback benefits, will become more common in the coming years.
For those fresh out of college, it might not be wise to contribute to a 401(k) if they must stay with an employer for many years to get the match. Sure, they’ll still get the initial tax deduction for their contributions, but they’ll also end up with limited—and potentially high-priced—investment options. The median tenure for workers ages 25 to 34 is less than three years, according to the Bureau of Labor Statistics. That survey was conducted before the pandemic began. Younger workers are likely job hopping even faster today.
I’ve been interviewing for finance jobs recently. Two major firms I spoke to didn’t even offer a matching retirement plan contribution, but they did offer other financial incentives that came with lengthy vesting periods. Is that going to be the new normal? With employee turnover hitting a record high, companies must not only work hard to hire quality workers, but also they’ll need to get creative if they want to retain them.