--- title: Don't Make This Costly 401(k) Mistake When Switching Jobs description: New research from Vanguard finds the typical job switcher’s retirement saving rate goes down 0.7 percentage points when changing companies. authors: - name: Pete Grieve role: Lead News Reporter url: https://money.com/author/pete-grieve/ bio: Pete Grieve is a personal finance reporter. In his time at Money, Pete has covered everything from car buying to credit cards to the housing market. education: University of Chicago, BA Political Science at_money_since: 2022 articles: 600 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes social: - https://twitter.com/pete_grieve - https://linkedin.com/in/pete-grieve-b5aa02138 - https://www.facebook.com/petegrieve4 editors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2024-10-07T19:53:51.000Z' modified: '2025-01-13T20:26:33.000Z' section: Retirement tags: - News word_count: 505 canonical: https://money.com/switching-jobs-401k-mistake/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Rolling coins that follow a set path.](https://img.money.com/2024/10/News-401K-Switching-Jobs.jpg) Powered by: ![](https://s3.consumersadvocate.org/prd/image/image/25353/2b0c46d2-8a19-4d53-a713-9b8ee77e9901.png) A reverse mortgage can be an important part of your retirement plan – use your home's equity as a steady stream of cash flow to give you financial flexibility. Let Longbridge Financial show you how. [Go to Longbridge-Financial.com](https://money.com/pr/pc494df450d7?ap_referrer=%2Fswitching-jobs-401k-mistake%2F) When Americans switch jobs, they often see a boost in earnings — but if they're not careful, a common [401(k)](https://money.com/401k-and-401k-rollover/) mistake can be a major setback for their retirement savings. A 401(k) allows you to allocate a percentage of your paycheck to a tax-advantaged investment account. These employer-sponsored plans are a smart tool for most workers because contributions reduce your taxable income, meaning you don’t pay taxes until you make withdrawals when you’re older. Also, many employers match contributions up to a certain amount, multiplying the savings effect. Job switchers, though, apparently have a tendency to set a lower contribution rate when they start their new roles — and that can be a costly misstep. According to [new research](https://digital-assets.vanguard.com/corp/research/pdf/job_transitions_slow_retirement_savings.pdf) from Vanguard, the typical job switcher’s retirement saving rate goes down 0.7 percentage points when changing companies. Some people who set a lower 401(k) rate still end up contributing more because their pay bump is significant. In dollar terms, workers who job-switch typically contribute more to their 401(k)s in their new role if their pay bump is at least 10%. But that's not true percentage-wise. “What seemed counterintuitive was that those who experienced a pay increase of more than 20% — and hence a potentially greater capacity to save — still exhibited a slowdown in their saving rate,” the Vanguard report said. Broadly speaking, over half of job switchers, 55%, lower their saving rate, while 44% increase or maintain it. And while the report acknowledges that changing jobs can involve expenses like moving costs, the Vanguard researchers also blame plans’ default contribution rates, which kick in when an employee forgets or elects not to set a 401(k) rate. They report that 3% is the most common and suggest that needs to be higher. Even a small difference in your saving rate can have a large impact on your saving. “For a worker earning $60,000 at the start of their career who switches jobs eight times across employers (for a total of nine jobs), the estimated loss in potential retirement savings could be $300,000 — enough to fund an estimated six additional years of spending in retirement,” the report said. Those figures are based on hypotheticals in which a person works from age 25 to 65 with a starting salary of $60,000. The math assumes a 3% default and employer match. In the job-switching scenario, the worker's contribution rate resets to 3% with each job change. Over a course of decades, that leads to a large gap compared to a scenario in which they stayed put and benefitted from automatic increases in their contribution rate. To be clear: The point isn’t that it’s a bad idea to change jobs (that’s a personal question). But job switchers should aim to at least maintain their saving rate when they make the move. ## Unlock the Power of Your Home Equity ### From paying off a mortgage to creating an additional stream of cash flow, a reverse mortgage can unlock the equity in your home for a more secure retirement. Let Longbridge Financial show you how. [Learn More](https://money.com/pr/k5f0dc7d8205?ap_referrer=%2Fswitching-jobs-401k-mistake%2F) Longbridge Financial LLC (NMLS 957935) only offers reverse mortgage products. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/switching-jobs-401k-mistake/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Retirement", "item": "https://money.com/retirement/" }, { "@type": "ListItem", "position": 3, "name": "Retirement Planning", "item": "https://money.com/retirement-planning/" }, { "@type": "ListItem", "position": 4, "name": "Don't Make This Costly 401(k) Mistake When Switching Jobs" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/switching-jobs-401k-mistake/#webpage", "url": "https://money.com/switching-jobs-401k-mistake/", "name": "Don't Make This Costly 401(k) Mistake When Switching Jobs", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2024-10-07T19:53:51.000Z", "mainEntity": { "@id": "https://money.com/switching-jobs-401k-mistake/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/switching-jobs-401k-mistake/#breadcrumb" }, "dateModified": "2025-01-13T20:26:33.000Z" }, { "@type": "NewsArticle", "headline": "Don't Make This Costly 401(k) Mistake When Switching Jobs", "articleSection": "Retirement", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2024/10/News-401K-Switching-Jobs.jpg", "width": 2580, "height": 1720, "caption": "News-401K-Switching-Jobs" } ], "author": [ { "@type": "Person", "name": "Pete Grieve", "url": "https://money.com/author/pete-grieve/", "@id": "https://money.com/author/pete-grieve/#author", "description": "Pete Grieve is a personal finance reporter. 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