According to a Fidelity news release about the survey, overall, 35% of Gen Y job changers with funds in a plan reported cashing out of their 401(k) or 403(b) during their most recent employment transition. The most common reasons for doing so were: a small balance perceived to be not worth rolling over (30%); job loss led to a greater need for the money (24%); money was needed for a major purchase (20%); money was needed for everyday expenses (19%).
Fidelity’s study found that guidance provided during an employee’s job changing transition may play a crucial role in deciding whether to cash out of a retirement plan or roll the assets over. More Gen Y individuals today show a reluctance to “job hop” with one in four indicating the intent to remain with a current employer until retirement, up from 14% in early 2008.
Job changers who had funds in an employer-sponsored retirement plan and sought guidance cashed out 29% of the time versus 49% for those who didn’t receive guidance, Fidelity found.
Still Workplace Savings Program Support
Despite the strong focus on funding current expenses, 57% of the respondents to the Fidelity poll still believe that employer-based savings plans are the best way to build a retirement nest egg. In fact, 18% now consider saving for retirement to be their “most crucial goal” versus 13% in 2008.
Asked which workplace benefits are a “must have,” Gen Y individuals ranked health insurance first (82%), followed by paid vacation time (68%) and access to a retirement savings plan (57%).
“Many Gen Y-ers have become more engaged with their finances through this economic downturn and are recognizing how critical it is to save early for retirement,” said Philippe Mauldin, executive vice president, Workplace Investing at Fidelity. “However, this is the life stage when retirement is competing with an ever growing list of financial priorities.”
In general, the Fidelity news release said workplace benefits have taken on greater importance in the latest survey. The majority of Gen Y (62%) individuals responded that the quality of benefits packages influences their choice of employer, with 64% stating it also impacts their job loyalty.
Some 44% believe that the value of the benefits they receive should be tied to their workplace performance, with 49% describing the current benefits approach as a one-size-fits-all system where everyone gets the same package.
Data for the survey was collected August 19-26, 2009, by TNS Global and is based on responses from a national sample of 1,017 employed adults with annual household incomes of at least $15,000.