How to handle a job change without derailing your retirement plans

How a job change can shape your retirement path

If you’re one of the millions of Americans who lose their jobs in 2025, you’ve likely felt the emotional stress and financial shock that comes with layoffs. A job loss interrupts cash flow, often causing people to pause contributions or tap into retirement accounts.

“You’re not going to be disappointed,” says Stu Bradley, a wealth advisor at Hightower Wealth Advisors St. Louis, said such a shift could lead to “emotional turmoil and financial leakage.” When evaluating your next steps, he says, “An active approach ultimately slows down emotions, filling in those leaks so that we have a better chance of keeping requirements plans intact.”

Bradley describes loss of function as being “on a plane and then suddenly losing altitude” and that the first step is to stabilize the situation. When workers leave an employer, hasty decisions — such as improper rollovers or account divestitures — can cause lasting damage to escalate over the long term. Stabilizing income and thinking through decisions helps prevent these mistakes and protects future growth.

What to do now to keep your retirement savings on track

To protect and rebuild your retirement savings, Bradley suggests “stabilizing short-term cash flow while protecting long-term assets.” “This means building up a three- to six-month liquidity reserve if you don’t have that, avoiding any cash withdrawals from your 401(k), and then consolidating your 401(k) accounts.”

During the transition period, you may need temporary or flexible income to avoid tapping your retirement accounts. Some people are exploring entrepreneurship or freelancing, Bradley says. If you choose either route, remember to budget for health insurance and set up a retirement plan like a Solo 401(k) or SEP IRA.

Counseling is another common bridge option. “If you’re in a job search transition and need income, a transition might be to start doing some consulting in an area where you’re an expert, and make sure you’re charging fees that cover your overhead,” Bradley says. A helpful guideline is to take the hourly wage you previously earned and add approximately 40% to it to cover costs such as health care.

When you’re ready to consolidate your 401(k) retirement accounts, a direct rollover to an individual retirement account (IRA) is the best approach, he says. If your former employer cuts a check to you directly from your account, it could result in penalties and a double loss, so it’s important to understand how to transfer your money to a new account. (Learn more about rolling over a 401(k).) Directly transferring money from these old accounts will ensure you don’t incur large tax deductions when you consolidate, Bradley says.

Once your income stabilizes, Bradley recommends rebuilding your automated savings. “Reconsider your retirement savings rate and asset allocation,” he says. Even a modest increase can pay off.

“If you can simply make a small increase of, say, 1% a year in that new job, in the long run that can lead to a significant long-term increase that you can take advantage of in your retirement years,” he says.

When you get a new job, review the details of your new employer’s retirement plans. Your new employer plans are not identical to the old plans, so you’ll need to ask these questions:

• What are the fees?
• What is the matching formula?
• What are vesting schedules?

Knowing how your new plan works will help you rebuild your savings with confidence and avoid surprises in the future.

How to keep your retirement on track once things are settled

After you restore your savings and consolidated accounts and restart contributions, the next step is to keep your retirement strategy working for you over the long term.

You’ll need to revisit your retirement plan at regular intervals, check that your savings rate still fits your income, and ensure that investment fees remain reasonable and that your portfolio’s risk level matches your long-term goals as your career develops.

As you evaluate your career and financial options, Bradley recommends several resources:

• Retirement plan comparison tools from sources like FINRA and the Department of Labor
• Your wealth advisor, if you have one, to help you with your financial situation and job search
• Community groups for people going through career transitions

And remember: you will succeed in your career transition. Bradley recalls a client who navigated multiple challenges at once, such as divorce, job loss, and severe back pain. “Sometimes we’re in the thick of one of these things [and] “You don’t see the way out,” Bradley says. You can still survive. You can still get through it.”