Here’s What Happens to Your IRA When You Switch Jobs

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Getting a new job? Find out what that means for your IRA. 

There may come a point where you find yourself looking for a new job. Maybe you’re unhappy with the fact that your salary barely pays you enough to cover your expenses, let alone pad your savings account. Or maybe you’re just not content with your work environment and want a more laid-back atmosphere.

It’s generally a good idea to move your retirement savings into a new plan when you leave a job at which you participated in a 401(k) plan. But if you have your long-term savings in an IRA, there’s really no need to do anything.

Your IRA won’t be impacted by a job switch

As a salaried employee, to save in a 401(k) plan, you need to be offered that option by an employer. (If you’re self-employed, you’re eligible to open a solo 401(k) that you fund and manage on your own.) But an IRA is an account you open and manage yourself, and it’s not tied to an employer. So if you leave a job and take a new one, there’s really no need to do anything with your IRA. That move won’t affect your IRA at all.

Now if you’re moving from one job to another and you have a 401(k), that’s a different story. In that case, it’s generally not a good idea to leave funds in an old 401(k) even if you have the option to do so. Going that route runs the risk that you’ll forget about that money and join the ranks of the roughly 29.2 million orphaned 401(k) plans that are floating around to this day, according to Capitalize.

If you have a 401(k) through your employer and are switching jobs, it pays to either roll that money into an IRA (even if you have to open a new one from scratch), or roll that money into your new employer’s 401(k). However, for the latter option to work, you’ll need to make sure that your new company offers a 401(k), and that new employees are allowed to participate right away. Some companies force new hires to wait a certain amount of time before signing up for their retirement plan.

Should you keep saving in your IRA once you get a new job?

It may be that you opened an IRA because your former employer did not offer a workplace retirement plan. If your new employer does offer a 401(k), participating in it could be a really good idea if your company offers a match.

There are no hard-and-fast rules when it comes to employer matches, and it’s at the discretion of your company to offer one in the first place. But let’s say your employer will match up to 100% of $3,000 in 401(k) contributions annually. This means that if you were to contribute $3,000 from your salary, you’d end up with $6,000 added to your 401(k) plan per year. That’s a really good deal.

However, if your employer doesn’t offer any sort of match for its 401(k) and you’re not all that happy with the investment choices offered by that plan, then it could pay to continue saving for retirement in an IRA. One advantage of IRAs over 401(k)s is that they commonly offer a wider range of investment choices. That could help you not only build a portfolio that works well for you, but minimize investment fees. So it could pay to stick with your IRA and keep doing what you’ve been doing.

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