January and February are peak hiring months, according to Indeed, making it an ideal time to submit your applications if you’re planning a career shift in 2025. It’s crucial to find a job that matches your skills and meets your priorities. Once you’re in a new position, you will need to familiarize yourself with your new responsibilities.

However, don’t neglect to evaluate your retirement savings plan during this transition. Here are three important steps to take as you begin your new job.

1. Determine your options for your old 401(k)

If you previously had a 401(k) with an employer, you’ll need to decide what to do with those funds. If your balance is under $1,000, your employer can cash out your account and send you a check, which you must deposit into a new retirement account within 60 days to avoid taxes. If your balance is between $1,000 and $5,000, your employer can transfer those funds into an IRA of its choice.

If you have more than $5,000, your employer cannot take the money away, but it may not be the best choice for you. You could choose to roll your funds into an IRA for more investment control or transfer them to your new employer’s plan, if allowed.

When transferring funds, opt for a direct transfer instead of an indirect one. This means you inform your old plan administrator where to send the money, allowing the transfer without you touching it. In an indirect rollover, where you receive a check, your employer must withhold 20% for tax. To avoid taxes and possible penalties (10% early withdrawal fee if under 59 ½), you would have to reinvest the full amount, including the withheld tax, within 60 days.

2. Check your eligibility to contribute to the new 401(k)

You might not be able to join your new employer’s 401(k) plan immediately. Many companies require you to complete one year of service and be at least 21 years of age to participate. For part-time workers, you may need two years of work with a minimum of 500 hours per year to qualify.

If you cannot contribute right away, consider setting up an IRA on your own. This gives you the flexibility of deciding how to invest and control over your tax timing. Be cautious of income limits if you go for a Roth IRA.

Consider establishing automatic transfers from your linked bank account to simplify your contributions. If you’re uncertain about how to set this up, consult your IRA provider.

3. Reassess your investment plan

401(k)s allow those under 50 to contribute up to $23,000 annually, with higher limits for those 50 and over. However, if saving in an IRA, be careful not to exceed the $7,000 contribution limit for those under 50 ($8,000 for those 50+).

Moreover, reviewing your investment choices is wise to ensure you’re optimizing returns while minimizing risk. Index funds often suit most investors due to their diversification benefits and low fees. Alternatively, target-date funds offer a more hands-off approach, adjusting as your risk tolerance changes over time.

A yearly review of your retirement strategy is a good practice, as both your investment choices and savings strategies can evolve. Set a reminder for 2026 to reassess your investments.

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