Anne Tergesen
speaker
4,485 appearances
83 recordings
1 series
first heard Jul 2017
last heard Feb 2025
Anne Tergesen’s voice in public audio — every appearance, attributed to the second.
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Appearances
Or they just, they get used to their paycheck being higher and to not saving.
And they keep thinking, well, I'll do it next month.
Or they just forget.
A third category of people, they move into another job that automatically enrolls them in the 401k plans.
But often automatic enrollment happens at like 3% of pay, which is pretty low.
And a lot of people who aren't super on top of their retirement savings will just leave their
savings rate at 3%.
It's safe to say that a significant portion of people see their savings rate decline because they're just not that engaged.
So when people change jobs, a lot of people actually will just go into their 401k savings at their prior job and they might withdraw some of that money or maybe even all of it.
You have to pay taxes and often you have to pay a 10% penalty if you cash out or withdraw your
savings early.
Another mistake that people make is they roll over their old savings into an IRA, but they don't realize that when they roll it over, the money is sitting in cash.
A lot of people think that when they roll it over, the money is automatically invested in the markets, and it's not.
And so people who do that rollover, sometimes years later, they find the money still sitting in cash, and they could have earned a higher return in the stock market
They looked at like over 50,000 people in their own universe of 401k plans that they administer.
They looked at people who switched jobs and moved from one Vanguard administered 401k plan to another.
They were able to look at the behavior of people before and after they switched jobs.
And what they found is that the median job switcher gets a significant raise, like a 10% raise when they move from one company to another.
but their 401k savings rate goes down by almost a percentage point.
In general, there's that sort of mismatch of here you are progressing through your career, you're getting a nice big raise, but you're allowing your 401k savings rate to slip down, which isn't ideal.
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