Job Switchers Face Retirement Saving Challenge

According to a recent Vanguard report, job switchers typically experience a 10% increase in salary, yet their retirement savings rate often declines by nearly 1%. Kelly Han, head of Retirement Research at Vanguard, emphasizes that many workers lose focus on their retirement plans during transitions, primarily when they overlook enrolling in their new employer's retirement plan like a 401(k). This often leads to a reduction in their contributions, as new employers may have different default settings compared to former employers. Han stresses the importance of understanding the retirement benefits offered by a new employer and ensuring that previous savings are transferred properly. Moreover, she discusses the upcoming cost-of-living adjustments (COLA) to Social Security benefits, which are influenced by inflation rates. While lower inflation may lead to modest increases in these benefits, Han encourages individuals to focus on what they can control, such as the age at which they claim Social Security, as delaying claims can result in substantial annual growth in benefits. This nuanced perspective highlights the dual challenge of switching jobs while managing retirement planning effectively, making awareness and proactivity critical during these career transitions.