Changing jobs can be a positive career move, with the potential for higher salaries and better benefits. However, while employees may experience an immediate income boost, their long-term financial health can suffer.

During these transitions, retirement savings often take a back seat, leading to lower contribution rates, lost savings, and gaps in retirement planning.

This article explores the impact of job changes on retirement savings and highlights digital consolidation as a solution to maintaining savings momentum throughout career transitions.

The Job Change Savings Challenge

While job changes are common, they often introduce setbacks in retirement planning. Many employees prioritize immediate financial benefits, such as salary increases, without considering how changes in employer benefits may affect their long-term savings.

  • Income increases, but savings decline: Workers who switch jobs see a 10% salary increase, yet their savings rate drops. Without employer nudges or auto-escalation, they contribute less despite earning more.
  • The real cost of contribution gaps: A one-year break in contributions can significantly impact long-term savings. A missed year of saving means lost investment growth, compounding over decades.
  • Impact on retirement readiness: Many workers assume they can make up for lost savings later, but research consistently shows that delays in contributions lead to lower retirement balances, reducing financial security in later years.

Employers must provide solutions that reduce friction and encourage continued contributions, even during transitions, so that employees can maximize salary increases and retirement savings.

Breaking Down the Savings Disruption

Vanguard’s research shows that while job changers experience a 10% income increase, their retirement savings rate drops by one percentage point. Many employees do not enroll in a new retirement plan when auto-enrollment isn’t available, leading to gaps in their long-term savings. These disruptions significantly reduce retirement readiness and make it difficult for workers to recover lost savings over time.

Job changes introduce structural issues that disrupt long-term retirement savings. Vanguard research highlights four key challenges that workers face:

  1. Higher-income, lower savings: Workers who switch jobs see a 10% salary increase, yet their savings rate declines. This decline is due to lower default contribution rates at new employers, compounded by the lack of auto-enrollment or automatic escalation.
  2. Gaps in participation: Employees who move to new jobs without auto-enrollment often delay or fail to enroll in their new employer's retirement plan, leading to missed contributions and lost investment growth.
  3. Lower default savings rates: Vanguard research highlights that many new employer plans set a default savings rate—typically 3%—which is often lower than what employees contributed at their previous jobs. This reduction in savings directly impacts overall retirement savings.
  4. Limited use of auto-escalation: Without automatic increases in contributions, workers may fail to gradually raise their savings rate, missing out on long-term financial growth.

These disruptions can have long-term consequences. For example, employees who reduce their contribution rate for just a few years may struggle to make up the lost savings later in their careers. Therefore, employers need to focus on solutions that maintain savings continuity and educate employees on strategies to sustain consistent contributions.

Solutions for Saving Continuity

Employers can help employees stay on track by implementing policies and using digital tools that make it easier to maintain retirement contributions. Some of the most effective solutions include:

  • Auto-enrollment in retirement plans: Automatically enrolling employees in a 401(k) plan at their new employer reduces the risk of savings interruptions.
  • Higher default savings rates: Setting initial contribution levels higher than 3% encourages workers to continue saving at a meaningful rate.
  • Automatic escalation: Implementing auto-escalation ensures that contributions increase over time, helping workers gradually build their savings without manual adjustments.
  • Digital consolidation tools: Providing seamless rollovers between employer-sponsored plans reduces the likelihood of managing multiple accounts, shrinks the frequency of cashouts, and honestly makes it much easier for participants to keep track of their savings.

Employers that integrate these features into their retirement benefits strategy can improve the overall financial well-being of their workforce and reduce savings gaps caused by career transitions.

Maintaining Momentum Through Transfers

A common barrier to consistent retirement savings is the difficulty of transferring accounts when changing jobs. Many workers leave old 401(k) accounts behind, losing track of funds and paying unnecessary fees. Digital consolidation makes this process easy, ensuring employees keep their savings growing without interruptions.

Benefits of quick and seamless transfers:

  • Prevents lost savings: Consolidating accounts eliminates the risk of abandoned 401(k)s and unclaimed retirement funds.
  • Improves retirement readiness: Workers who actively manage their savings across job changes are more financially prepared for retirement.
  • Simplifies account management: Having all savings in one place makes tracking contributions, investment growth, and overall retirement progress easier.
  • Boosts engagement with retirement planning: Employees who consolidate their accounts are more likely to continue contributing at meaningful levels.
  • Reduces administrative burden: Employers benefit from fewer inactive accounts, simplifying plan management and compliance tracking.

Digital transfer solutions allow workers to complete rollovers in minutes rather than weeks, removing the friction that often leads to delayed or missed retirement contributions. Employers who offer these tools demonstrate a commitment to financial well-being and empower employees to take control of their retirement savings.

Ensuring a Confident Retirement Future

When employees are confident in their retirement savings, they experience less financial stress and can better focus on career growth. Employers who offer accessible, streamlined solutions help their workforce build long-term financial security.

Learn how Manifest helps participants maintain retirement savings through job changes. Schedule a demo today to see how seamless transfers can transform your workforce’s retirement readiness.