A 401(k) plan is offered through an employer, so your ability to contribute to it ends if you change jobs (although you can take your money with you). However, you always have the option of opening your own retirement account. In general, these accounts are traditional IRAs and Roth IRAs.
To open a retirement account, fill out an application through a bank, credit union or brokerage firm that offers them. Once you’re approved, transfer money to your retirement account, choose investments, and buy and sell as you wish.
Once your account is set up, you can contact your HR department and request a certain dollar amount from each paycheck be routed into your new account (just the way you route money to your checking account). This is an easy way to automate your savings and ensure you stay on track to reach your goals.
With a traditional IRA, you enjoy a tax deduction for every dollar you contribute. As with a traditional 401(k) plan, however, you’ll pay income tax on the amount you withdraw from your IRA during retirement. And watch out for the fine print: the IRS limits your tax deduction under certain circumstances.
With a Roth IRA, you pay taxes now on the amount you contribute. However, you’ll be able to withdraw your contributions and their earnings tax-free when you retire. Again, review your eligibility requirements, as high-income households may be restricted from contributing to a Roth IRA account.