Switching jobs? There's more to do with your 401(k) than just rolling it over
Switching jobs can be a great way to increase your pay, but make sure it doesn't hurt your retirement savings
Job hopping is one of the best ways workers have to increase their pay, and a surprisingly solid job market means they still have opportunities. That’s great news for workers, but remember: Make sure you’re setting aside as much into your new 401(k) plan as your old one.
When a worker moves to a new job, they have to take the extra step of signing up for their new employer’s 401(k) plan and deciding how much of their paycheck to contribute. Otherwise, if they’re lucky, they’ll end up getting automatically enrolled into the plan and contributing whatever the employer decided as the default percentage of pay.
At nearly half of the 401(k) plans with automatic enrollment that Vanguard keeps records for, that default is 3% or 4%.
For first-time workers just starting their careers, that kind of contribution might make some sense, even if the rule of thumb is to save 10% to 15% of your pay. Many 401(k) plans will also automatically increase that savings percentage by 1 percentage point per year.
