Changing Jobs? An IRA Could Move With You

Changing jobs shouldn’t disrupt your retirement savings goals. 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 to your new workplace retirement plan. And depending on your company’s plan, the wait could be as long as a year, which is a long time to have your dollars sitting on the sidelines.

This is where opening an IRA could be helpful. An IRA isn’t tied to your workplace, allowing you to keep saving for retirement while you’re waiting to participate in your new company’s 401(k) plan. Also, having an IRA in addition to your 401(k) plan can give you the opportunity to maximize your retirement savings each year.

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 2024 and 2025, the standard annual contribution limit is $7,000. In other words, you can contribute up to $7,000 each year between all of your traditional and Roth IRAs.

If you’re age 50 or older, you can make an additional catch-up contribution of $1,000, which means you can contribute up to $8,000 total ($7,000 + $1,000). Visit IRS.gov for more information on “catch-up contributions.” 

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. If you have questions about whether an IRA is right for you, talk to your financial advisor.

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 plan providers.

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