Staying at a Job for the Retirement Plan

Workers with 401(k)s are more likely to job hop than employees with pensions.

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Many workers take into consideration an employer’s retirement plan when making decisions about where to work and how long to stay at their current company. Some 41 percent of employees say retirement benefits are compelling them to stay with their current employer, according to a Towers Watson survey of 3,099 full-time private-sector employees. And a quarter of the employees surveyed say retirement benefits attracted them to their current job.

[See 10 Key Retirement Ages to Plan For.]

Workers who leave a company before they are fully vested in the retirement plan could get nothing or only a fraction of the benefits they would get if they worked at the same company for a longer period of time. Pension plans are generally set up to reward employees with the longest job tenure. Those who leave a company before they are fully vested in a 401(k) plan may not get to keep any or only a portion of the employer’s contributions to their 401(k).

[See 11 Retirement Resolutions for 2011.]

Traditional pensions are generally more likely to attract and retain employees than 401(k) plans. A third of employees with traditional pensions say the retirement program motivated them to accept a job with their current employer, compared to only 21 percent of workers with a 401(k) plan, Towers Watson found. Over half (59 percent) of employees with pensions say the promise of a guaranteed retirement payout compels them to stay at their current job. However, only 32 percent of workers with a 401(k) plan are sticking around for the 401(k) match. In fact, most employees with a traditional pension (80 percent) would like to keep their current job until retirement, compared to 62 percent of workers with 401(k) plans.

[See 7 Reasons Job Hoppers Are Worse Off in Retirement.]

It’s not only older workers who pay attention to the retirement plan when deciding where to work. Younger employees are increasingly looking for a job that will provide them with retirement security. Some 43 percent of workers under age 40 say their employer’s traditional pension program was an important reason they chose to work at their current company, up from 28 percent in 2009. However, far fewer workers under 40 chose their current employer for the 401(k) plan (17 percent). Younger employees who have a pension generally plan to stay in their current job until retirement (70 percent). Workers under 40 with 401(k)s are much more likely to job hop. Only 39 percent of younger workers with 401(k)s plan to stay at their current company for the rest of their career.