By Anne Tergesen
Americans are switching jobs more often, and it's costing them a chunk of their retirement savings.
Some 30% of people leaving their jobs forfeited money when they walked out the door, according to new research from Vanguard. The data measured forfeitures through 2023 for people who left their jobs in 2018. The 30% figure reflects an increase from the 20% of people who left their jobs in 2010 and forfeited money.
On average, the forfeitures wipe out 40% of affected employees' balances, reducing total retirement savings by $26,000 over a 40-year career for someone with average pay. They disproportionately affect lower-income employees.
The forfeitures result from 401(k) plan vesting rules, which require employees to stick around for a set time-three or more years-before they own employer contributions to their accounts.
The rules are meant to nudge people to stay at their jobs, though some workers vest immediately.
The typical American changes jobs nine times, which can penalize retirement savings in many ways, Vanguard has found. Some are automatically enrolled at a lower savings rate. Others roll over a 401(k) to an IRA and forget to invest the money.
A survey Vanguard conducted of 1,018 employees in October found that two-thirds were unaware of their 401(k) plan's vesting requirements.
Some who plan to quit may discover it's worthwhile to delay their departure to avoid a forfeiture, said Aaron Goodman, an economist at Vanguard and coauthor of the study, which looked at 4.7 million people leaving jobs in plans Vanguard administered between 2010 and 2022.
The research found that vesting requirements don't generally have the desired effect on employee retention.
Rather than waiting for their vesting dates to pass before quitting, workers left their jobs at similar rates in the 12 months before and after their vesting dates.
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February 14, 2025 13:30 ET (18:30 GMT)
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