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In today’s “Money Mondays” segment, Mellody Hobson talks about changing jobs and what to do with your 401(k) when making the switch.

Today I want to talk about what to do with your retirement plan when you change jobs.  The first rule is NEVER EVER cash out your 401(k) plan. It seems I really can’t say this enough times because people are still doing it!

I think everyone knows that cashing out your 401(k) to do home repairs or pay for your wedding is a bad idea, but when switching jobs comes up, the money seems “up for grabs” in people’s minds. Make no mistake: It’s not! It’s for your retirement, and it’s a NEED to have, not a “nice to have.”

Young people are especially at risk. Aon Hewitt just released a report that shows more than half of workers in their 20s who have 401(k) plans cash out their holdings when they change jobs, partly because their balances are relatively low. This is compared to only about a third of those who change jobs in their 50’s. (And a third is still way too many!)

So why are young people more likely to cash out?

For starters, young adults have less money and rationalize that they need it right away. And I get it. When you’re trying to make ends meet, it’s tempting to cash out any account with dollar signs that has your name on it. But this is the thing. The penalties are SO punishing that the best mentality for everyone to take is that if it’s in your 401(k) plan, it’s not your money—yet!

Think Twice About Cashing in Your 401(k) Plan When Switching Jobs  was originally published on

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