Frequently changing jobs can make it more difficult to save for retirement. The median job tenure of American workers was 5.1 years at the same job in 2008, according to a new study by the Employee Benefit Research Institute.

Some job-hopping workers move in and out of retirement plan coverage throughout their career and cash out small 401(k) balances when they change jobs, both of which will lead to a smaller nest egg in retirement.

Many retirement accounts also have waiting periods before new workers may join the plan and 401(k) match schedules meant to reward long-term employees while giving short-term employees little or nothing. "You could easily work for a company for two years and forfeit the whole 401(k) match amount when you leave," says Frank Armstrong, founder of Investor Solutions and coauthor of Save Your Retirement: What to Do If You Haven't Saved Enough or If Your Investments Were Devastated by the Market Meltdown.

"It's pretty dismal in terms of the number of years that people who change jobs could be out of the retirement planning system."

Here is why job hoppers may end up worse off in retirement and how to avoid these traps.

Waiting periods

Workers don't always get to sign up for the 401(k) plan immediately when they start a new job.

Liza Brings, 54, a data analyst in Richmond, Va., says there was a three-month waiting period before she could join her employer's 401(k). To complicate matters, her first three months employed didn't coincide with a quarterly sign-up period, so she ended up out of the retirement system for six months. "Everybody wants to stay in one job forever, but I think that way of life is gone," says Brings. The two longest-held jobs in her career were eight years each. "Every time you change jobs, theoretically you get an increase in pay so you could possibly put that money aside, but nobody does that," she says. Some companies also impose waiting periods before they begin matching 401(k) contributions. Dick Bean, 55, an attorney who started a new job on January 4, enrolled in his company's 401(k) plan right away but won't receive a match for an entire year.

Vesting schedules

While workers always have access to their own contributions to a 401(k) plan, short-term employees sometimes don't get to keep the 401(k) match.

Only 37 percent of 401(k) plans provided immediate vesting in 2008, which means you can keep your 401(k) match as soon as it is deposited, according to a Profit Sharing/401k Council of America survey. Other 401(k) plans may require you to be with the company for two or three years before you can hold on to any of your employer match. And some companies impose a graduated vesting schedule in which workers retain a gradually increasing percentage of employer contributions based on job tenure. Leaving a job before you are vested could mean giving up thousands of dollars' worth of compensation. "Delaying your departure by a couple of months could have a dramatic impact on your 401(k)," says Dan Solin, senior vice president of Index Funds Advisors and author of The Smartest 401(k) Book You'll Ever Read. If you're fortunate enough to be recruited by another employer before you are fully vested in your current 401(k) plan, ask that employer to provide you with the compensation you are giving up.

Hopping in and out of coverage

Some workers move in and out of retirement plan coverage throughout their career.

IT consultant Chris Maeda, 43, of Salem, N.H., has been in the workforce for about 12 years, but for only six of those years has he worked for software companies that provided a 401(k), and none of his employers offered a match. In 2004, he started his own business, Brick Street Software, and saved some money on his own in an IRA account. "In the middle years, I sort of didn't save very much because it was a new business," says Maeda. In 2007, he set up a 401(k) for self-employed workers. "You've got to do your own IRAs for those years you are out of the system," says Armstrong.

A mixed-up match

Workers may also switch between jobs that do and don't provide a 401(k) match or work for an employer that eliminates the match.

Going even one year without a 401(k) match could shrink your nest egg by thousands of dollars in retirement. For example, a 30-year-old worker earning $50,000 annually who saves 6 percent of his salary in a 401(k) and previously received a 50 percent match will have $16,000 less in retirement if he goes without a match for one year, according to calculations by Hewitt Associates, a human resources consulting firm. (The calculation assumes the employee earns 7 percent returns on investments and receives a 3 percent annual raise.) If the worker becomes discouraged after the match is cut and stops his own retirement contributions for a single year, he will have $48,000 less for retirement, Hewitt found.

Plus, not all 401(k) matches are created equal

The average company contributed 2.9 percent of employee pay to a 401(k) plan in 2008, according to the Profit Sharing/401k Council of America. But the average obscures a wide diversity of 401(k) matches, ranging from just 25 cents for each dollar contributed to over $1 for each dollar the employee saves.

A smaller 401(k) match is effectively lower compensation, so you need to make sure that a lower 401(k) match doesn't cancel out the higher salary a new job offers.

401(k) disparities

The typical 401(k) plan has about 18 investment options, and their corresponding fees vary widely among 401(k) plans.

If you switch into a 401(k) with higher fees, your nest egg will grow more slowly. "The lower fees you pay, the more money you are going to have in retirement," says Joshua Itzoe, principal at Greenspring Wealth Management and the author of Fixing the 401(k). "Try to keep your expenses as a participant under 1 percent. There's no reason a participant should pay more than 1.25 percent for everything." In extreme cases, 401(k) fees can cancel out the benefits of saving for retirement in a tax-deferred account. "Many companies have such horrible 401(k)'s that the employee is well served not to invest in them past the point where they get the match," says Armstrong. "The drag of 3½ percent costs on an annual basis applied to the total amount invested swamps the benefits of tax deferral."

Cash-outs

Many workers cash out their 401(k) plans when they leave a job, especially when they have a small balance.

American workers took about $74 billion from their retirement accounts when they job hopped in 2006, according to a recent Government Accountability Office report. When you cash out a 401(k), generally 20 percent of your account balance is withheld by your employer for federal and state income taxes due on the amount withdrawn, and those under age 59½ must also pay a 10 percent early withdrawal penalty. "Taking it out is generally a terrible idea," says Solin. "Because of the tax penalty and regular income tax, you will have only a fraction of what is in the plan."

For example, a 1970-born 401(k) participant who saved 6 percent of pay annually beginning at age 21 plus a 3 percent employer match would typically accumulate $588,049 by age 65, according to GAO calculations. But if the same participant cashed out his nest egg at age 35 when he switched jobs and paid the tax penalties, he would have only $404,431 at retirement age. And this calculation assumes the worker immediately moves into a new job and saves the same amount with an identical employer match, which could be difficult for a laid-off employee to do. Job hoppers can avoid early withdrawal penalties and continue to enjoy tax-deferred growth by leaving their nest egg with their old employer, rolling their account balance over into a new employer's retirement account, or transferring the balance to an IRA.

Pension formulas

Many pension formulas reward long-term and highly paid employees more than workers with a shorter job tenure.

Consider a worker who is covered by a traditional pension that pays 1.5 percent of final earnings for each year of service. Someone who begins working for the company at age 30 and retires at age 62 with a final salary of $55,000 would be entitled to an annual benefit of $26,200 per year in retirement, according to calculations by the Center for Retirement Research at Boston College. But if the same worker switched jobs at age 45, when he was earning $35,000, to a firm with an identical pension plan and salary, he would have a combined benefit from both pension plans of only $20,900. If you're fortunate enough to have a job with a traditional pension, your retirement benefits will generally be higher if you stick with the same job.

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(c) 2010 Emily Brandon, U.S. News & World Report