It’s very common these days for young people to move from job to job. The days of sticking with a company for decades and earning a big pension are over.
Thankfully, 401(k) plans and individual retirement accounts allow workers to switch jobs without losing their retirement savings, but it’s still possible for all that job-hopping to disrupt your ability to save. If you do switch jobs regularly, there are some sensible things you can do to ensure that your retirement plan stays on track.
Open a traditional or Roth IRA
If you are between jobs with no access to an employer-sponsored retirement plan, there are still things you can do to save. If you have any earned income at all, you can contribute to an individual retirement account, which allows you to invest with some tax advantages.
With a traditional IRA, any money you contribute is deducted from your taxable income. With a Roth IRA, your money is taxed upfront, but you will avoid paying any taxes on investment gains when you withdraw the money when you retire. IRAs can be very powerful tools for retirement savings for self-employed people, part-time workers, or those with irregular incomes. You can maintain and contribute to these accounts even after you get a 401(k) plan from a new employer. (See also: 401(k) or IRA? You Need Both)
Roll over your 401(k)
If you had a 401(k) from one employer and switch jobs, you can take the funds from the old account and add it to the new one. This is called a 401(k) rollover. There usually is no penalty if you don’t merge the accounts right away, but over time the old 401(k) provider may start to bug you about it. You should consider a rollover if the retirement fund from your new employer offers better investment options, lower fees, or both. If you call the brokerage firm that is managing your old 401(k), they will usually be happy to walk you through the steps to carry out a rollover. (See also: A Simple Guide to Rolling Over All of Your 401Ks and IRAs)
Open a rollover IRA
If you no longer have access to a 401(k) or don’t like the investment options in your new retirement plan, you…
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