How a career change affects retirement


  • Career changes happen and can affect retirement planning in different ways
  • There are some common retirement savings options and a career change can impact them
  • Know the important questions to ask when you consider a career change

The days of a single career track with one company, or even in one field, are far less common than they used to be. Several career changes are the norm for most people—the US Bureau of Labor Statistics estimates the average Baby Boomer has switched jobs ten times. Some people might associate frequent job changes with their younger years, but many of us for various reasons, might find ourselves thinking about pursuing a new career or work opportunity later in life, even after retiring from a primary field. These considerations follow the changing way many people are thinking about retirement in general. Influenced by increases in health and longevity, as well as economic fluctuations and generational shifts, retirement is no longer simply a time to stop working. Instead, we can think of it as a new phase of life with possibilities for new projects, ways to find purpose, and opportunities for enrichment-financial and beyond. 

If you are facing a career change now it may be by choice in pursuit of new challenges or opportunities, or it may be due to layoffs or other necessities. Depending on when a career change happens, your retirement planning might need to be re-evaluated or modified. Additionally, there are important considerations and organizational details to prepare for to make sure you stay on top of your plans, investments, and goals for the future. 

Reasons for career change 

The last several years have presented clear challenges and reminders of the always-changing reality of our economy and the ways our businesses and lives are forced to adapt to macro and micro level forces. The Employment Benefits Research Institute publishes a yearly Retirement Confidence Survey which tracks data related to individuals’ retirement plans, expectations, and realities. The 2022 report found that about half of retirees retire earlier than expected. Of these 4 in 10 do so because they have the financial means. The remaining two-thirds however are forced to retire due to reasons like company downsizing, a health problem or disability, or the need to care for family members. The report also indicates that most current workers plan to either transition from full-time work to retirement or to continue working in some capacity after retiring from their longer-term career.

The realities of possible corporate downsizing and/or facing changing degrees of health and capacity to continue working at the same level are important to include in your retirement planning. At the same time, it is helpful to think about reasons which might cause you on your own to choose to switch careers, or change the nature of your working life at different stages leading up to and into retirement. These reasons might include wanting to branch out and explore different skills or interests, or be related to a geographic move, or a desire for a different pace—perhaps switching from a salary position in a big company to a lower stress hourly wage position in a small business or area you enjoy. 

Another reason some people will consider a career change is the desire to start a small or independent business. After working and saving, paying down debts, raising a family, the challenge of a new business project appeals to many, and can be an opportunity for renewed purpose, expression of individual talents or innovation, and of course a source of income as well. 

Retirement considerations for a career change

Whatever the reasons for your career change, there are important considerations to make sure your retirement planning remains strong and supported through each change and phase. It may take time to get back on your feet if you have been laid off or had to stop working for other reasons beyond your control. Even if you chose a career change there will likely be an adjustment period in the new role, or a gap in time between when one position ends and another begins. In this in-between time, it’s important to make sure to account for any retirement plans or savings connected with your previous job and make decisions about what to do with them. 

Most people will have employment-based retirement savings—either a defined-benefit plan such as a pension, or a defined-contribution plan like a 401(k). If you have a defined-benefit plan it may be held by the employer until you file a claim for it when you retire, or you may choose to cash it out as a lump sum payment. For most types of retirement savings plan, if you do withdraw funds before the age of 59 ½ you will be responsible for taxes, and there is a chance there will be a tax penalty for early withdrawal. However, if the amount withdrawn is rolled into another qualified plan such as an annuity or perhaps an Individual Retirement Account (IRA), the penalty could be avoided.

Defined-contribution plans are more common than defined-benefit these days and many workers will be familiar with 401(k)s as the most common variety of employer-offered retirement account. When you leave a job, you have the option of cashing out your 401(k)—though this will incur both tax on the amount, as well as a likely 10% early withdrawal penalty. However, a recent change in the law allows for exceptions to this penalty rule. This means that if you need to withdraw funds for the following qualifying reasons you will not have to pay the penalty fee:

Each of these exceptions involves specific details and caveats and it’s a good idea to speak with a financial professional or tax professional if you’re considering an early withdrawal.

For some people, an option might be to roll over your previous employer-offered account to your new employer’s offering. Many workplaces allow this option and rollovers from one 401(k) to another will not incur penalties. This is one way of maintaining continuity and ensuring consistent contributions even when there are interruptions or changes in your employment. If you don’t yet have a new employer, or if your new employer’s 401(k) does not allow rollovers, it is also possible to rollover your 401(k) to an IRA.

If you’ve been saving for retirement individually through an IRA, you’re subject to many of the same rules, penalties, and exceptions as a 401(k) would be though of course you won’t need to worry about rolling over your account. You’ll just want to make sure you can continue making contributions even if there is a gap or change in your employment. Additionally, IRAs do allow for several other exceptions to penalties in the event of funds being needed for certain life events:

  • Education expenses: if you, a spouse, child, or grandchild is considering higher education, IRA funds can be used penalty-free for tuition and other expenses. 
  • First-time homebuyer: a bit misleading as the IRS defines a “first time” buyer as someone who has not owned a home for two years. 
  • Health insurance if unemployed: if you and/or your spouse lose your job, funds can be withdrawn without penalty to cover health insurance premiums. 

Like the exceptions above, each of these has special provisions and limitations and it’s always a good idea to enlist professional guidance if you are facing any of these events or possibilities. 

Other considerations when changing careers

Whether you are seeking a career change on purpose or being pushed to it by circumstance, there are lots of ways to approach your new chapter. There are a few ways of thinking about new careers that will also fit within the new way we think about retirement as a time of different phases with different needs and goals. 

  • What are your transferable skills? Depending on the field you work in you may have experience or skill sets that translate well to other fields. Remember that skills include both “hard” skills—those skills and experience that are directly related to specific job performance—and “soft” skills—personal traits and qualities that can be applied to any situation or role. Depending on your financial situation and needs you might discover your skills could be well-used in the non-profit sector, in charity work, or through shifting to volunteering instead of a wage-earning position. 

  • What is driving this change? Losing a job due to layoffs can be disappointing, but it can also be a chance to explore other facets of your field or expand beyond it. If you have been forced to leave a job because of illness or injury you might need to think about how your skills can be used in ways or settings that allow accommodations for a more limited physical capacity. If you are seeking new challenges or have decided to pursue a passion project, you might find there is needed education or preparation needed before applying for or starting a new role. 

  • Are you striking out on your own? Many people are interested in the possibility of starting an independent business. This can be an opportunity to apply the skills and experience you have cultivated over many years toward a new independent purpose. For those thinking of this option there are many programs available through the US Small Business Administration that can help provide guidance and support to you. Equitable is a corporate sponsor of, the SBA’s largest volunteer mentor organization. Through SCORE you can receive mentorship from experienced entrepreneurs as you start and build your new business. 

Career changes are part of life, and as we learn to think about retirement as an era on its own—one with different phases and needs—we can see the challenges and opportunities these changes present. Whether beyond our control or due to our desires and choices, changes are complicated, but with the right preparation and guidance you can adapt and find value in meaning at each stage.

This information, which does not constitute investment advice, has been obtained from an outside source and is provided for your convenience by Equitable. Equitable and its affiliates and associates do not provide investment or market research. Equitable Advisors, LLC and its affiliates make no representation as to the accuracy or completeness of any statements, statistics, data, opinions, forecasts, or predictions provided herein. 

Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (Equitable Financial) (NY, NY), Equitable Financial Life Insurance Company of America (Equitable America), an AZ stock company with main administrative headquarters in Jersey City, NJ, and Equitable Distributors, LLC.  Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI and TN).

GE- 5688870.1 (05/2023) (Exp. 05/2025)