Is Job Switching Hurting Black And Latine Workers’ Retirement Savings?

Black and Latine workers tend to switch jobs more frequently, which can boost paychecks but comes at a cost.

According to a recent report by Vanguard, frequent job changes could reduce retirement savings by as much as $300,000 over time.

When combined with systemic inequalities, these patterns create significant challenges in building long-term retirement funds.

The Hidden Costs of Job Switching

The typical US worker changes jobs every five years, but for younger, female, Black, and Latine workers, job tenure is even shorter.  This instability means their retirement contributions often take a hit. 

While job hopping can bring an average 10% pay raise, Vanguard found it also leads to a 0.7 percentage point drop in savings rates.

Over time, these small dips can add up significantly—potentially costing workers as much as $300,000 in retirement savings, enough to fund six additional years of retirement.

Why Retirement Savings Decline

Key reasons for this are savings decline include low default savings rates and delayed enrollment at new jobs. 

Many employers auto-enroll workers in 401(k) plans at a default 3% contribution rate, which is often lower than what employees contributed at their previous jobs.

Additionally, some employers do not auto-enroll workers at all, leaving about a quarter of new employees without any retirement savings contributions in their first year.

The impact of these trends is magnified for Black and Latine workers, who are more likely to face layoffs and employment gaps, further disrupting their retirement planning.

Solutions to Bridge the Gap

While automatic enrollment in 401(k) plans has increased participation rates, default savings rates are often too low to maintain savings momentum across job changes. 

To address these challenges, experts recommend increasing the default contribution rates to at least 6% to help workers maintain consistent savings.

Another recommendation is implementing portable savings rates, allowing workers to carry their contribution rates when switching jobs to smooth transitions and reduce savings disruptions.