What do I do with my 401(k) when I start a new career?

When you’re taking a chance on a new career, it’s important to consider your old 401(k) carefully. Even if your new job doesn’t offer a 401(k) option, you can (and should) keep the retirement savings going.

Take it or leave it … or roll it over
If you want to move the money in a 401(k) plan without paying taxes or penalties, there are generally three options for you to choose from.

• Don’t do a thing. You may be able to keep the money where it is, remaining in the plan you had in your former career.
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• Go all in at the new job. You may have the option to move the money into your new employer’s plan.
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• Roll into an IRA. If you are a self-directed type or need more investment options, a rollover IRA (individual retirement account) may be a good choice. Within an IRA, your funds can be invested any number of ways. You also have the option to convert to a Roth IRA, a move which you should discuss with a financial professional.

Learn where 401(k) meets 403(b)
In certain cases, a career change can lead to even more options for your 401(k). If you ditch the corporate world for something more philanthropic, for example, your future may include a new type of plan: the 403(b).

• Understand 403(b) plans. These are similar to 401(k)s in that contributions are pretax. They’re designed for employees of nonprofit and tax-exempt organizations, such as hospitals, churches and schools.
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• Do some comparison shopping. In general, investment offerings within 403(b) plans tend to be more limited compared to 401(k)s. It’s wise to get to know the investments in your new employer’s plan before deciding your next move.
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• Merge it or move it. Similar to 401(k)s, savings in a 403(b) can be moved to an IRA during your career change. Or, if you like your 403(b) investment choices, you may be able to move what you saved in your former 403(b) or 401(k) to the new employer-sponsored plan.

DIY with an IRA
If your next move does not come with an employer-sponsored retirement plan, consider saving for retirement on your own. Here are two common scenarios:

• If you work for someone else and there is no retirement plan attached to your new role, you could make annual contributions to an IRA. You may even be able to deduct contributions and lower your tax bill.
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• If you work for yourself, consider the benefits of retirement plans for the self-employed, such as a SEP IRA, SIMPLE IRA or Solo 401(k) plan. Each plan offers tax-favored ways to save and invest for retirement.