Many travel nursing companies have 401k plans in place and offer the plan as an employee benefit for their travel nurses. The 401k is a great place to put money aside, and very often, the company may even match the contributions made by the travel nurse, which makes it even more beneficial.

As a travel nurse, though, there are considerations that should be made before participating in the plan. Make sure to check how the matching works and look into how the vesting schedule is set up. The matching is basically going to show what the company will put into your 401k, and it is normally a percentage of your salary and can depend on what you put in yourself. The vesting schedule will show you how long you have to stay with the employer to keep the money they put into the plan. The vesting schedule often follows a sliding scale where you get to keep a higher percentage of the employer contribution the longer you stay. This is important to look at since travel nurses often change jobs more frequently than regular nurses.

How Do I manage multiple accounts?

As you advance your career and work for different employers, you may end up with multiple retirement accounts. This can be difficult to manage and also inefficient. Here are the 4 main options you have to manage your multiple accounts.

Option #1: Cash Out the 401k

You can cash out the account, pay tax and potential penalty on the distribution, and then take that after-tax money and invest it or spend it. This is often not the most efficient or most attractive choice to make, especially if you have a good amount of money inside the retirement plan. The cash out will be added to your other regular income (for the year in which you take your cash out), and suddenly you may end up in a higher tax bracket.

Option #2: Transfer to a new 401K

Do a transfer of the money to your new employer’s new plan if the new plan allows for this type of transfer. From a tax perspective, the tax law encourages transfers between companies and these types of plans. As long as you don’t make any withdrawals, you will not owe any current income tax, and all your old plan money can continue to grow until you begin income from this plan in retirement. As a travel nurse, this may not be the best choice as you may switch employers again.

Option #3: Transfer to a Traditional IRA

You can transfer the money directly to a Traditional IRA set up in your name. Again you have to arrange this transfer between the plan you are leaving and your new choice of IRA provider. In this type of case, you do not receive money, and again there is no current income tax concern. This will often make the most sense since an IRA is your own personal account, and it stays with you no matter where you end up working.

Option #4: Transfer to a Roth IRA

You may transfer the plan money into a Roth IRA if you qualify. In a Roth conversion, you will pay current income tax on the amount that you are converting, and then you can qualify for income tax-free distributions later on. This works as well as long as you follow the rules around Roth conversions.

So what is the best option?

It is not possible to say which option is the best. Things such as current liabilities, short-term savings, age, income, and what else is in place financially will determine the best route. In many circumstances, you will need to do a full financial assessment before making a correct decision. Your financial advisor can help direct you, taking all of these items into consideration.

About CreativeNurse:
The CreativeNurse was created to help nurses make educated financial decisions in all areas of their financial life. We have educational seminars, personal planning sessions, and much more to help you make informed financial decisions.

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Making informed choices on investments as travel nurses often get overlooked.

Gypsy Nurses, your travel nursing career provides a tremendous amount of freedom and variety; you can explore new places, meet new co-workers, and control many aspects of your daily routine. However, as much as you may love being a Gypsy Nurse, that doesn’t mean you’ll want to do it forever.

Retirement goals are significant to travel nurses who look forward to spending more time with loved ones and a slower, more relaxing pace. So, you need to plan for retirement sooner rather than later to help ensure you get there and enjoy it!

Consistent Funding is KEY

Most retirement planners agree that it’s not the amount but regular, consistent funding that’s the key to successful retirement savings.

Some quick math: You might be surprised at just how much you can save with a steady plan.

For example: if you’re 25 years old and contribute $50 a paycheck with 26 paychecks per year, at a retirement age of 65, your retirement account balance could be worth $277,692. Increase that contribution to $60—that raises the potential balance to $333,231. These scenarios assume a very conservative 7% rate of return on your investment and are by no means a guarantee, but it’s important to understand the impact proper planning can have. While it’s certainly better to start saving early, understand that it’s also never too late to start saving for retirement – don’t give up if you’re an “older Gypsy” and haven’t started – now is the time!

Choosing the correct retirement vehicle is also critical in your planning.

With many agencies touting their 401(k) plans as retirement savings vehicles, you also need to take a hard look at what these plans can mean for you and your specific situation. The 401(k) plans the agencies are marketing often sound very attractive, yet if you take some time to read the fine print, the reality may surprise you.

In fact, after interviewing financial experts regarding 401(k) and IRAs as options for travel nurses, we found that a traditional IRA may be the smarter choice than a 401(k) for most travel nurses. Why? An IRA provides a convenient, effective, hassle-free way to manage your retirement account, regardless of who your employer is.

Here are some basic facts and realities of 401(k) and IRA plans we pulled together to help you sort through the noise out there:

Overview of IRAs and 401(k)s

Traditional IRA and 401(k) plans are the most popular types of retirement savings accounts that let the individual make “tax-deferred” contributions to the account. Tax-deferred means that you are not required to pay Federal income taxes on the money contributed to the savings account, but you’ll have to pay taxes on it later when you withdraw it upon retirement.

Investment companies typically administer these accounts so that the employee can invest the money in any number of available investment vehicles. All investment vehicles have some degree of risk associated with them and varying rates of return. Similar options are available for both 401(k)s and IRAs.

401(k) Matching Myths

Fact:

Many travel nurse staffing firms often hype the “matching” component of the 401(k) plans they offer. This means the agency will match the contribution up to a predetermined amount, dollar for dollar. For example, the agency could contribute $1 for every $1 that the employee contributes, up to 3% of their annual salary.

Traveler Reality:

Unfortunately, these firms rarely mention that most travel nurses don’t work at one agency long enough to meet the “vesting” requirements for matching funds. A “vesting period” is the period before the employer contributions are actually owned by the employee and can often be years long. For example, if the agency has a 2-year vesting period and you switch agencies after 1 year, you will forfeit the $1 for $1 employer’s match. These vesting periods are often unrealistic for travel nurses because they may change companies to secure specific job assignments.

Additionally, some agencies fail to make you aware that there is a “wait” period that requires some time frame of continuous employment before you can participate in the 401(k) program as well as any matching benefits. You may not even be permitted to take advantage of 30 – 90 days out, nearly the length of the assignment.

Retirement Plan Management 101

Fact:

Since you may decide to switch agencies over the course of your career, you may quickly end up with several 401(k) accounts that require attention. Managing these diverse accounts can get cumbersome as well as expensive. All of them will have some administrative fee associated with them. You can “rollover” the previous 401(k) to the 401(k) of your new agency, and you can also cash out or transfer to a traditional IRA.

Traveler Reality:

Many agencies don’t mention that additional fee are associated with certain actions that quickly lower your investment balance. For example, there are fees to transfer money out and taxes and penalties to cash out of your 401(k). The IRA for a retirement vehicle provides all the tax benefits of the 401(k) as well as the flexibility to fund it no matter which agency you work for or how many times you change; you carry it with you regardless of your employer or career choices. This means less paperwork, and it also avoids fees, both internal and external, for administration and transfer that are incurred if you have a 401(k).

Making Sense of Contribution Caps

Fact:

There is an $18,000 annual contribution limit (note: some plans have a “catch up” component that enables those over 50 years of age to contribute more) to the amount of money you can contribute to a 401(k) plan. In addition, there will often be a limit to the amount an agency will match in their program that’s dramatically lower than $18,000. Furthermore, there are investment limits to an IRA account. This is based on several factors, including your income. In general, the limit for IRA contributions set by the IRS is $5,500 for the 2017 tax year, with an additional $1,000 contribution allowed if you’re over 50.

Traveler Reality:

Data suggests that the IRA contribution caps do not impact most travel nurses. Most travel nurses don’t reach the maximum amount in their typical investment behavior. For example: using our $50 per paycheck example, this adds up to $1,300 for the year. It’s important to clearly understand if the cap is a practical issue before giving up all the benefits and flexibility of an IRA account.

The Gypsy Bottom Line – IRAs are a Better Choice for Most Travel Nurses

Many travel nurse staffing agencies are vigorously marketing their 401(k) plans, but these are filled with rules and restrictions that quickly diminish the overall value and convenience of a 401(k) and can make them poor choices as an investment vehicle for most travel nurses.

IRAs are a better retirement funding choice for most travel nurses. Here’s why—most IRAs provide:

✅ Ownership: you can take it with you if you change employers with no paperwork
✅ No waiting period
✅ 100% vested on day one
✅ Automatic payroll deduction even if you switch agencies
✅ Options to save on a tax-deferred basis
✅ Simplified management
✅ Plans that can stay with you for the long term
✅ The ability to minimize fees

It’s possible to put your retirement within reach. Most importantly, our advice for travel nurses is to start saving as soon as possible. Carefully think about financial goals, and seek an agency that offers payroll-deducted IRAs.

We hope you found this information helpful. The Gypsy Nurse welcomes your comments, insights, or experience with these retirement plan options. Please share your comments here below – we would love to hear from you!

NOTE: The Gypsy Nurse is committed to serving the needs of today’s travel nurses. Our goal is to provide topical information and general guidance to our community. This information is not intended to replace that of a trained financial advisor. We strongly suggest that you consult with a certified professional to discuss your specific circumstances, retirement goals, and options.

401K

As a Travel Nurse, What Should I Do With My 401(k)?

How Do I manage multiple accounts?

Option #1: Cash Out the 401k

Option #2: Transfer to a new 401K

Option #3: Transfer to a Traditional IRA

Option #4: Transfer to a Roth IRA

So what is the best option?

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Make an Informed Choice: 401(k)s and IRAs for Travel Nurses

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