From Yahoo Finance: 2025-03-31 13:30:00

Switching jobs can boost your career and income, but it may harm your retirement savings. Financial expert Suze Orman warns that failing to adjust your 401(k) contributions after switching jobs could result in up to $300,000 less in retirement funds, according to Vanguard. This can happen due to low default contribution rates.

Employers often automatically enroll new employees in retirement plans, but the default contribution rate is usually low, around 3% of salary. If you were previously contributing 10% or more and your new employer sets you at 3%, you’ll save much less without realizing it. Vanguard research shows that less than half of job switchers maintain or increase their savings rate, impacting long-term retirement security.

Vanguard’s analysis compared scenarios for a worker starting at $60,000 salary: consistent 10% savings vs. switching jobs eight times at 3% contribution rate each time. The difference in retirement savings could be $300,000, covering about six years of retirement expenses. Orman stresses the importance of avoiding default rates that are too low for long-term financial security.

Orman advises checking and increasing the default contribution rate when starting a new job, aiming for at least 10% savings. Even with a higher salary, maintain the same percentage contribution to build retirement security. Increasing savings won’t feel like a sacrifice with a higher income. Don’t let default rates set you back on retirement savings.



Read more at Yahoo Finance: This 401(k) Mistake When Switching Jobs Could Cost You $300,000