Savings Strategies: Avoiding Common Retirement Pitfalls in 401(k) Plans
Thursday, 10 October 2024, 20:48
Savings Strategies: Understanding Job Switch Impacts on 401(k) Contributions
Millions of Americans rely on their 401(k)s for a comfortable retirement. However, new research reveals a common pitfall: when switching jobs, many employees reduce their contribution rates, jeopardizing their savings.
The 401(k) Contribution Dilemma
- Higher incomes often lead to lower savings rates.
- Most default savings rates sit at 3% upon job switch.
- This can result in losses of up to $300,000 over a lifetime.
Fiona Greig, global head of investor research at Vanguard, highlights that many automatically enroll in their new employer's 401(k) plan at this lower rate, failing to consider their previous savings levels. Properly managing these contributions is key.
How to Protect Your Savings
- Review your current 401(k) contributions immediately after a job switch.
- Consider enrolling at your previous rate or higher.
- Consult with a financial advisor for tailored advice.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.