I'm considering a job change with a $20k salary increase, but I'll lose my 401(k) vesting

Personal Finance

401(k) plan: A employer-sponsored retirement savings plan where employees can contribute a portion of their salary on a pre-tax basis and the funds grow tax-deferred until withdrawal in retirement.

Published: December 23, 2024 10:14 am

Making a job change is always a juggling trade-off between immediate benefits and long-term financial goals. A recent Reddit post from r/personalfinance highlighted a tough choice: taking a $20,000 salary increase and a better job title but losing $18,000 in unvested 401(k) employer match due to cliff vesting.

Key Points

While an $18,000 unvested 401(k) loss is substantial, the opportunity for a $20,000 salary increase, a better title, and career growth make switching to the new job an easy decision.
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Let’s break down what someone in a similar situation should keep in mind when trying to navigate this situation.

A Closer Look at the Situation

The Reddit user is a Senior Data Analyst considering a promotion to Data Engineer. While the new job offers:

$20k more annually in salary
A better title, which could boost long-term career growth
Comparable benefits to their current employer

That said, they will lose $18,000 in unvested 401(k) employer match, as they will be quitting before the company’s vesting policy is fulfilled. The new company requires that they be onboarded before the vesting period is complete.

Factors to Consider

So, what should someone in a similar situation consider?

1. The Immediate Financial Impact

Losing $18,000 is serious. However, this user estimates that they could recover this in around three years by maximizing contributions at this new job and still earn an additional $10,000 in annual pre-tax income.

2. Career Advancement Opportunities

The move offers them a pay bump and a step up to a Data Engineer role. A higher title could also lead to long-term salary prospects and greater job security, especially in their competitive industry.

3. The Retirement Plan Trade-Off

Losing unvested funds hurts, but it’s essential to evaluate:

The new 401(k) plan benefits and whether they offset the loss over time.
The potential to recover losses through aggressive savings.

What Do We Recommend?

What would we recommend? It’s important to have a long-term perspective in career and financial decisions. Here’s what we would recommend:

Focus on Net Gains: If the new job’s financial and career benefits outweigh the loss, the move is likely to be worth it.
Vesting Policies: I’d take a close look at the new company’s vesting policy, though, especially if you feel like another job move might be in your future.

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