Most people see the beginning of a new year as a fresh start, including employers. January and February are some of the most popular hiring months, according to the job-search site Indeed, and that means a lot of workers will soon be adjusting to new positions.
Learning the ropes of your new job will likely be top of mind, but don't forget to think about how this move will affect your retirement strategy as well. Try to find some time within the next couple of weeks or months to do the following three things.
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1. Decide what to do with your old 401(k)
You aren't required to do anything with the 401(k) from your old job if you don't want to. You can leave it where it is, and that money will still be there for you whenever you are ready to use it.
But juggling multiple 401(k)s and possibly some IRAs as well can be confusing. Some 401(k)s also charge costly fees, which make them poor investment vehicles, especially when you're no longer receiving a company match.
It might be easier for you to roll your old 401(k) funds into an IRA in your name. This gives you greater freedom to invest your money how you want and have some say in the fees you're paying.
Just make sure to choose an account that's taxed the same way as your 401(k). Most 401(k)s are tax-deferred -- you'll want a traditional IRA for those funds. But if you have a Roth 401(k), you can roll those over into a Roth IRA.
You could theoretically move money from a traditional 401(k) to a Roth IRA as well. But this would raise your tax bill significantly, so it might not be your best move.
2. Decide how much you'll contribute to your new 401(k)
Once you have the job and you know what your salary will be, decide how much you would like to set aside in your new 401(k) each pay period. Or you could save in an IRA if your new job doesn't have a retirement plan. You can base your savings amount on how much you estimate you'll need for retirement, or you could aim to set aside at least 15% of your income.
Ask about how your company's 401(k) matching formula works if there is one, how much you'll get, and what is the plan's vesting schedule. This is important for new employees because it determines if you're able to keep your employer-matched funds should you leave the company.
High earners shouldn't forget about annual contribution limits, either. Adults under 50 can set aside up to $23,000 here in 2024 while those 50 and older can save up to $30,500. Be careful not to exceed these limits, though, or the IRS will penalize you at tax time.
3. Verify your HSA eligibility if you plan to use one
Health savings accounts (HSAs) enable you to set aside money for medical expenses, and they also make great retirement accounts. But not everyone can contribute to them.
You need a high-deductible health insurance plan -- one with a deductible of $1,600 or more for individuals and $3,200 or more for family plans in 2024. If you meet this requirement, you can set aside up to $4,150 in an HSA with a qualifying individual plan or $8,300 with a qualifying family plan next year. And those 55 or older can add another $1,000 to these limits.
If you plan to use an HSA for retirement savings, ask about the health insurance plan's deductible so you know if you're eligible to use one next year. If not, you will have to rely upon your workplace retirement plan and IRAs to store your savings.
The above steps shouldn't take too long, so it's worth getting them out of the way as soon as you can. Once you've finished them, you can decide upon your retirement savings strategy for next year and get back to learning the ins and outs of your new job.
