New job? Don’t leave your savings rate behind

Read time: 8 min

Learn why changing jobs is an important moment to check in on your retirement savings goals and how to ensure you’re saving enough at your new gig, so you stay on the path to retirement.

How might this affect your retirement plan?

A recent Vanguard study found that more than half of the people who switch jobs have a decline in their savings rate despite having a higher income. If you’re part of that group of workers, you aren’t alone.

Why does this happen?

Retirement plans vary between employers, and the ways you join and contribute to retirement plans may vary wildly too. Some plans offer automatic enrollment, while some have you enroll on your own. And employers can choose from a number of other retirement plan options, like providing defaults for how much to save, guidance on what to invest in, offering an employer match, or partnering with a professional financial advice service. Each plan is curated to give you a roadmap to financial success—but remember, it’s up to you to make the most out of the benefits you have.

There’s a lot to do when you switch

Switching jobs is an accomplishment to be proud of, but it’s easy to feel overwhelmed. In the days after you get your new role, you might need to move, meet with your manager, and learn about your new employer’s benefits.

One of those benefits is your retirement plan—an important tool to retiring with enough money to enjoy the second phase of your life. And the most critical thing you can do to maximize this benefit is to regularly save from your paycheck and consistently save throughout your career—not just in this job.

So as exciting as your new opportunity is, you’ll want to make sure you’re carving out time to think about your future just as much as your present.

Recently changed jobs? Don’t let your retirement savings fall behind.

Increase your savings rate

Or contact your benefits office to update your savings rate.

How does a new job affect your savings rate?

Vanguard’s data shows that most workers follow what their new employer has set up for them in their retirement plan. This is why it’s so critical that you make sure to:

Enroll in your retirement plan if you aren’t automatically enrolled. If you don’t, you will save nothing from your paycheck. Not enrolling in your retirement plan can cause headaches and leave you with a lack of savings when you need it most.
Check your savings rate so that you’re saving at least as much as you were in your previous job.

Keeping that savings rate on track through your job changes is essential to building your retirement savings. If every time you switch jobs your savings rate drops to the new employer’s default, there’s a good chance you’re not saving enough. And that can have a massive long-term impact on your savings and your ability to comfortably retire when you want to. The solution is simple—take control by:

Bringing over your prior savings rate from your previous job to the new job. Only you know how much money you were putting in your prior plan. Remember, you might be defaulted by your new employer to save at a much lower rate or maybe not saving at all.
Thinking about your savings rate in combination with your employer match. Vanguard believes a total savings rate, including any employer contributions, between 12% and 15% is what most people should be aiming for. So, if your plan doesn’t offer employer contributions, think about how much more you need to save on your own.

How much money could you be losing out on?

A lot—based on our example below, it’s enough to fund an additional 6 years of retirement.¹

Take Jane and Peter, two workers who started their careers at age 25 and earned an initial salary of $60,000 before retiring at age 65.²Both start by contributing 3% of their salary to their retirement plan. They also enroll in automatic annual increases of 1 percentage point. And their employers offer a match of 50% on the first 6% of Peter's or Jane's contributions.

Jane changes her job 8 times but forgets to check her savings rate. Her savings rate drops to the new employer plan’s default rate each time she starts a new job. Each of her employers starts her savings rate at 3% and increases that by 1 percentage point each year, in addition to her employer match.

Peter also changes his job 8 times. But every time he gets a new job, instead of sticking with the 3% plan default, he makes sure his savings doesn't drop and continues to increase his savings rate by 1 percentage point per year until he reaches 10%. Because he consistently checks on how much he’s saving throughout his career, Peter ends up accumulating $795,203 while Jane accumulates $472,914. That’s a $322,289 difference.²

How retirement balances can be impacted by fluctuating savings rates when changing jobs

A line graph showing the retirement savings of two workers who started their careers at age 25 and earned an initial salary of $60,000 before retiring at age 65. This displays the contribution percentages for both workers.

Letting your savings rate drop after you switch jobs can cost you years of retirement. But you only need to check 4 boxes to avoid that.

What can you do?

Figure out how much you were saving before.

Compare how much you were saving before with your current savings rate.

If your savings rate went down, increase it so you're saving at least as much as you were before.

What if you can’t find how much you were saving before? Vanguard’s guidance is to save 12% to 15% annually—this can be combined between your contributions and your employer’s contributions.

Recently changed jobs? Don’t let your retirement savings fall behind.

Increase your savings rate

Or contact your benefits office to update your savings rate.

Additional resources:

Whenever you invest, there’s a chance you could lose the money.

¹Retirement expenditures are estimated to be $48,000 annually (in 2024 dollars), which represents 80% replacement of pre-retirement income. The $322,288 in foregone wealth is estimated to be able to sustain slightly over six years of total annual retirement expenses.

²This figure depicts the trajectory of total contribution rates for two hypothetical worker who begin employment at age 25 and retire at age 65. We assume that both workers change jobs every 3 years from ages 25 to 34, every 5 years from ages 35 to 44, every 7 years from ages 45 to 54, and every 10 years from ages 55 to 64 in scenarios involving job changes. Peter’s scenario assumes that the worker starts with a saving rate of 3% and increases this by 1 percentage point each year until reaching 10%, which is then maintained until retirement at age 65. Jane’s scenario assumes that contribution rate resets to the current median default rate of 3% at each job transition, with an annual increase of 1 percentage point until the next job change and capped at 10%. In all scenarios, employees receive a 50% employer match on the first 6% of employee contributions and we assume a nominal salary increase of 2% each year until retirement at age 65. Projected balances are shown in 2024 present value which assumes a 4.4% real portfolio return for both scenarios which is the difference between the assumed 6.4% rate of return and 2% inflation. This example doesn't represent a real investment, and the rate of return is not guaranteed. The final account balance does not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a tax-deferred plan before age 59½ are subject to a 10% federal penalty tax unless an exception applies.