A few years ago, having large gaps in your employment history may have been frowned upon. These days, it’s not unusual for many people to have large gaps of time in between jobs. Though most people are concerned about the appearance of gaps, the most serious implication long term unemployment can have is the daunting task of having to play catch up to your retirement savings.
Young savers in their 20s and 30s who have a gap in their retirement savings take a hit on their final retirement account because they miss out on the compounded returns. Luckily for them, there is time to make up for lost money. Adding a higher percentage to monthly 401K contributions or contributing any on hand money into a separate retirement plan like a Traditional or Roth IRA can help.
As people get older, the gaps in time become less damaging to their final retirement savings, but the contributions that are made need to be larger in amount and in a smaller amount of time. The key to all of this is to plan ahead for the unexpected. Create a rainy day fund that is specifically for emergencies. Avoid pulling money out of any account that is meant for retirement. You never know what tomorrow will bring, so plan today to help yourself out in the future.