Changing Jobs? An IRA Could Move With You

December 14, 2023

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What we’ll cover:

An IRA, unlike a 401(k), isn’t tied to your workplace and could move with you when you change jobs
An IRA allows you to keep stashing money away for retirement while you’re waiting to participate in your new company’s 401(k)
An IRA could also help you consolidate your retirement dollars from old 401(k)s

Changing jobs shouldn’t mean you have to press pause on saving for retirement. But if you rely only on an employer-sponsored 401(k) plan to save, you may have to go through a waiting period before you can start contributing at your new job. Depending on your company’s plan, the wait could be as long as a year. And a year is a long time to have your retirement dollars sitting on the sidelines.

This is where opening an IRA could be helpful. An IRA allows you to keep stashing money away for retirement while you’re waiting to participate in your new company’s 401(k). Because unlike a 401(k) plan, an IRA is not tied to your workplace, which could offer you a consistent, flexible way to save for retirement.

Opening an IRA can be easy

You can sign up for an account through an IRA provider like a bank or brokerage firm. Once you set up the account, you can begin contributing almost immediately. And you can keep going until you hit the annual contribution limit (which is determined by the IRS each year).

For 2023, you can sock away up to $6,500 (or $7,500 if you’re age 50 or older – see "catch-up contributions") between all of your traditional and Roth IRAs. For 2024, the maximum annual contribution limit is $7,000 (or $8,000 if you're age 50 or older).

An IRA could give you a consistent, flexible way to save for retirement.

Not sure whether to open up a traditional or Roth IRA? (Or perhaps, both?) Check out our article on the topic here, which walks you through some of the key differences between the two.

Good to know: IRS contribution limits and rules are always subject to change. See IRS Publication 590-A or check in with a tax professional for the latest information on eligibility rules, contribution limits and deadlines.

You could consolidate money from multiple old 401(k)s

Do you have a number of 401(k) plans left over from past jobs? Then your retirement money is probably scattered across several financial firms.

Keeping track of multiple 401(k) accounts can feel like you’re constantly having to pick up old socks. And who likes clutter? Especially when it comes to managing your money.

An IRA could be handy in helping to consolidate those 401(k) dollars all in one place. Rolling over your old 401(k) plans directly to an IRA could help you keep better track of your money.

It could also make it easier to see the big picture, like whether you’re invested in an appropriate mix of assets. A rollover may sound like a complicated process, but it doesn’t have to be. Most major banks and brokerage firms can guide you through the steps and any applicable rules.

Good to know: While IRAs have limits on how much you can contribute each year. There are generally no limits on how much you can move into an IRA by rolling over dollars from a 401(k). Not sure whether a rollover makes sense for you? Check in with your financial advisor who can help answer any questions you may have.

Learn more: 401(k) Rollovers: What You Need to Know

The bottom line

For many people, changing jobs is inevitable. But a job change shouldn’t have to disrupt your retirement savings. To help keep you moving towards your money goals, consider opening an IRA in addition to your 401(k).

Having both types of account can give you the opportunity to maximize your retirement savings each year.

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