Job hopping can lead to lower retirement savings, potentially costing workers up to $300K

From Yahoo Finance: 2025-04-19 08:07:00

Most people change jobs multiple times in their lives to earn more money. On average, baby boomers have had around 12 jobs, while older millennials have had closer to nine. Job hopping can lead to increased pay but may negatively impact retirement savings, potentially resulting in a loss of up to $300,000 in some cases.

A Vanguard report found that frequent job hoppers contribute less to their 401(k) without realizing it, leading to significant potential losses in retirement savings. Workers who switch jobs frequently could lose out on hundreds of thousands of dollars, impacting their ability to fund retirement spending.

Job hoppers often save less due to a variety of reasons, such as forgetting to enroll in a new employer’s 401(k) plan, major life changes, or emergencies. Those who stick with one job tend to save more over time than those who frequently switch employers, despite potential pay increases or benefits.

The median job hopper experiences a drop in savings rate of almost 1% with each job change, even with a 10% raise. This can significantly impact long-term retirement savings, making it challenging to reach the recommended savings rate of 10-15% of annual income.

Vanguard’s findings reveal that job hoppers often receive raises when switching jobs, but only 44% maintain or increase their savings rate. Many workers receive a default savings rate of 3% when enrolling in a new 401(k) plan, impacting their ability to save adequately for retirement.

For those who stay with one job throughout their career, the SECURE 2.0 Act will require companies to automatically enroll employees in 401(k) plans at a minimum savings rate of 3-10%, increasing by 1% annually. This design is effective for workers who remain with one employer for their entire career.

It’s crucial to consider the long-term impact of job hopping on retirement savings. Vanguard illustrates the potential savings over a career based on retirement savings choices, highlighting the importance of maintaining a consistent savings rate to secure financial stability in retirement.



Read more at Yahoo Finance: Avoid This Retirement Savings Mistake That’s Costing Americans Up to $300K