How can I invest for retirement as a travel nurse?

One Day In July Financial Advisors | September 13, 2022

If you are part of the growing number of travel nurses benefiting from higher wages and lower expenses, you have an opportunity to use that extra income to invest for retirement. You may be interested in opening an IRA or participating in a 401(k) plan. Both options will allow your money to grow tax free until you begin withdrawals. While 401(k)s have higher contribution limits, allow for loans, and may have employer matching, IRAs allow for more investing options and more control over fees.

There are a few questions you should ask before deciding what’s right for you:

Does my travel nurse agency offer a 401(k) match? If so, does it have a vesting period? Can I participate right away?

Some travel nurse agencies offer 401(k) plans with matching. If so, you may wish to take advantage of this option to earn additional retirement income. However, you should investigate whether there are vesting requirements or waiting periods. If the vesting period is longer than you end up working at the travel nurse agency, you won’t receive those match funds. If the waiting period before you can start contributing to your 401k is likewise too long, you will miss out on retirement savings contributions that you could be making right away in an IRA.

Am I likely to switch travel nurse agencies as I move from location to location?

Many travel nurses switch between travel nurse agencies as they look for the ideal next position. As a result, you could end up with multiple 401(k) plans. While you can roll these plans over into an IRA or into your new employer’s 401(k) plan, you may end up with an administrative burden you don’t want to deal with. If you aren’t qualified for a 401(k) match, investing in an IRA will allow you the flexibility to keep the same account regardless of any changes in employer while also allowing for more options and potentially lower fees.

How much will I be able to contribute yearly to my retirement fund?

Tax-deferred retirement plans come with yearly caps. You can contribute up to $6,000 a year to an IRA (plus an additional $1,000 if you are 50 or older) or up to $20,500 to a 401(k) ($27,000 if you are 50 or older). If you don’t qualify for a 401(k) match, you may be better off contributing to your IRA first so you can take advantage of the flexibility, options, and potentially lower fees an IRA offers. If you can contribute more than the limit, you can always use both an IRA and a 401(k), or even open a brokerage account.

Remember that the sooner you start investing, the better, as your contributions will compound over the years. If you need help getting started, reach out to a fiduciary financial advisor who can help you navigate your options. The advisors at One Day In July can meet with you over Zoom no matter where you happen to be traveling right now.

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