Switched jobs now I don’t have a 401k, what should I do next?
When we change jobs, it’s not uncommon to encounter changes in our benefits package. One of the most significant changes may involve losing access to your previous employer’s 401(k) plan. While it may initially seem daunting, there are several actions you can take to ensure that you continue saving for retirement effectively. In this article, we will address the options available to you, strategies for managing your retirement savings, and factors to consider when making decisions about your 401(k) when switching jobs.
1. Understand why you lost your 401(k) plan:
Before we delve into the solutions, let’s take a moment to understand why your 401(k) plan is no longer available. When you move to a new job, your previous employer’s 401(k) plan may not follow you due to various reasons. It could be because the new company doesn’t offer a 401(k) plan or has a different retirement savings plan option. Understanding the specifics of why you no longer have a 401(k) plan will help you develop an appropriate strategy moving forward.
2. Evaluate your new employer’s retirement plan options:
The first step is to explore the retirement plan options provided by your new employer. While it may not be a 401(k), many companies offer similar retirement savings vehicles such as 403(b) plans for nonprofit organizations or 457 plans for governmental entities. You should review the plan features, investment options, employer contributions (if any), and other related benefits. Understanding the details will help you make an informed decision about how to proceed.
3. Consider rolling over your 401(k) into an Individual Retirement Account (IRA):
If your new employer doesn’t offer a retirement plan, or if you’re unhappy with the available options, you can roll over your 401(k) into an Individual Retirement Account (IRA). This allows you to maintain control over your retirement savings and gives you a wider range of investment choices. There are two types of IRAs to consider: Traditional IRA, where contributions may be tax-deductible, and Roth IRA, which offers tax-free withdrawals during retirement. Evaluate both types based on your financial situation and future goals.
4. Weigh the pros and cons of consolidating retirement accounts:
If you have multiple retirement accounts from previous employers and your new employer offers a retirement plan, you may want to consider consolidating your accounts. Consolidating retirement accounts can make it easier to manage your investments, reduce administrative fees, and simplify retirement planning. It’s important to carefully review the new retirement plan’s investment choices, expenses, and any employer matches to assess if consolidation is in your best interest.
5. Review other tax-advantaged retirement savings options:
Apart from employer-sponsored plans and IRAs, there are other tax-advantaged retirement savings options worth exploring. One such option is a Health Savings Account (HSA), which allows you to save for medical expenses during your working years and throughout retirement. HSAs offer triple tax benefits, including tax-deductible contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses. High-deductible health plans usually accompany HSAs, so evaluate if this strategy aligns with your healthcare needs and retirement goals.
6. Seek professional financial advice:
When making important decisions about your retirement savings, it’s essential to seek professional financial advice. Consulting with a certified financial planner or retirement specialist can help you assess your options holistically and create a personalized retirement strategy. They can provide insights into tax implications, investment opportunities, and how to optimize your retirement savings in line with your unique circumstances.
7. Keep contributing to a retirement savings account:
Regardless of the path you choose, it’s crucial to continue contributing to a retirement savings account. Establishing consistent saving habits early on significantly impacts your financial security in retirement. If you don’t have access to an employer-sponsored plan, regularly contribute to your chosen IRA or comparable retirement account. Consider setting up automatic contributions to ensure you don’t miss out on accumulating compounding returns.
8. Explore alternative investment options:
In addition to retirement accounts, consider diversifying your investments by exploring other options like brokerage accounts, real estate, or starting your own business. These alternatives may provide additional income streams or capital growth potential, which can supplement your retirement savings. It’s important, however, to carefully evaluate the risks associated with each investment option and assess their compatibility with your personal circumstances and long-term goals.
9. Monitor and adjust your retirement plan regularly:
As life circumstances change and retirement approaches, it’s crucial to regularly monitor and adjust your retirement plan. Review your investments, assess your contribution levels, and reassess your risk tolerance periodically. Life events such as marriages, births, or career changes might warrant adjustments to your retirement savings strategy. Stay informed about changes in tax laws and investment landscapes to ensure you’re optimizing your retirement savings plan.
10. Stay informed and educate yourself about retirement planning:
Taking charge of your retirement planning is an ongoing process that requires staying informed about industry trends, regulations, and best practices. Utilize online resources, enroll in educational courses, or attend retirement planning workshops to enhance your knowledge. By empowering yourself with information and constantly learning, you’ll make better-informed decisions to secure a comfortable retirement.
In conclusion, losing access to a 401(k) plan after switching jobs doesn’t mean the end of your retirement savings journey. Evaluating your new employer’s retirement plan options, considering rolling over into an IRA, reviewing other tax-advantaged savings options, seeking professional advice, and maintaining consistent contributions are crucial steps to ensure a strong retirement savings foundation. Remember, retirement planning is a dynamic process, and regularly monitoring and adapting your strategy is essential for long-term financial security.
You don’t need a retirement account to save for retirement. Nothing is stopping you from saving $22.5k in a taxable brokerage account.
Financial order of operations :
Contribute till you get the match in 401k -> Max out Roth IRA > Max out HSA/401K
Your next option is to contribute to a brokerage account or invest in non-duplicable assets (Precious metals, real estate, collectibles) or business.
I’m pretty sure you could opt into a high deductible health plan and open your own HSA.
Will let someone more knowledgeable than me build on this from here though
Also, if all else fails, you can save in a taxable brokerage account. Its not ideal, but better than nothing.
Health savings account if and when you can obtain qualifying insurance, and if you have no regular health expenses that would just deplete it.
After that, save in a bank and/or invest in a diversified stock fund as suits your risk preference.
Save and invest maximum in an IRA, preferably Roth.
Save and invest additional in taxable brokerage. That could have lower taxes than 401K.
Open a brokerage account and use tax efficient investments. If you manage it right you will perform about the same as your 401k and end up paying far less in taxes overall. If you’re not sure how to do this, see an advisor
You still have a 401k. It’s just that your new job doesn’t have anything set up so you can pay into one.
Max out your Roth IRA each year. And your HSA if you have one. These two things should really be done before maxing out a 401k anyway.
There are other similar investment accounts. Check to see if you have access to a 403b, 457b, or TSP through your job. TSP is only for federal government jobs. 403b or 457b are most commonly available at non-profits or local government jobs — some even offer both. Also, related, see if you have an HSA.
If you don’t have any of these tax advantaged account types available to you, IRAs are a type of tax advantaged account available regardless of your particular employer, but with lower limits of how much you can invest. After you reach the maximum for an IRA if you don’t have any other tax-sheltered accounts, you can invest in a general brokerage account.
I really don’t know what to do in that situation either but I had always assumed I would roll my 401k into a transitional IRA if I didn’t have a 401k at my next job. No one has mentioned that tho so maybe that’s not a good idea…?
Don’t quote me on this but if you have any sort of side hustle that could qualify as self-employment, you might be able to open a solo 401k and contribute. worth looking into at least
HSA if possible and than brokerage account
Open brokerage account. Schwab, fidelity or vanguard. Monthly set aside as much as you want or can. No limits like on 401k or Ira’s.