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As a travel nurse, you have so many exciting options to choose from. Where to travel, what kind of housing to live in, and what kinds of adventures you want to plan for your next assignment, just to name a few. Even if you love the travel nursing lifestyle and can’t imagine retiring, the time will eventually come.
You know you have to plan for retirement, which can feel less fun — and even stressful or daunting. But, it’s a responsibility you can’t take lightly. Should you get a 401(k) or an IRA? How much should you set aside each month? Fortunately, most travel nursing agencies have programs that will help you navigate your options and plan your financial future.
The most common retirement savings plans travel agencies offer are 401(k)’s and Individual Retirement Accounts (IRA’s). They both allow you to make tax-deferred contributions to a savings account so you don’t have to pay federal taxes on them until you retire. So, what’s the difference and what is the best choice for a travel nurse?
Some agencies offer a 401(k) and tout the benefits of “matching funds.” The company will match a predetermined amount of your personal contribution, usually up to 3-5% of your earnings. However, there are usually vesting periods of 2-5 years, so if you switch agencies, careers, or take a staff nurse position before your vesting period is up, you can’t take advantage of the matching funds.
Most companies also make you serve a “waiting period” before you can sign up for their 401(k) and start contributing part of your paycheck to your retirement account and receiving matching funds. The waiting period is typically around 60-90 days. Furthermore, if you travel with several agencies over time and take advantage of their 401(k)’s, you’ll soon have several retirement accounts to manage. While 401(k)’s can be great if you plan to stay at a company for a long time, they may not be the best option for travel nurses.
While you can roll over your old 401(k) to a new one or cash it out completely, there are disadvantages you may not be made aware of. There may be expensive transfer fees and penalties to cash out. Alternatively, you can transfer your 401(k) funds to an IRA account and continue saving for retirement — which is becoming a more popular option for travel nurses.
Independent Retirement Accounts (IRA’s) are personal, tax-deferred accounts created to give you a way to save for retirement. An IRA is a great choice for travel nurses because you can take your IRA with you if you switch agencies or careers.
While the matching benefits of a 401(k) sound great, travel nurses must consider cost and flexibility. Any time you leave a job, you’re can’t contribute to that
employer’s 401(k) anymore and you’ve lost your matching opportunities. If you roll your 401(k) into a new one, you may face transfer fees and another waiting period before you can invest and receive matching funds again.
Some travelers are concerned with yearly contribution caps related to IRA’s compared to how much you can invest in a 401(k). While you can contribute $18,500 to a 401(k) per year (with an additional $6,000 if you’re over 50), most employers won’t match nearly that much. For 2018, $5,500 is the maximum you can contribute into an IRA — though you can contribute an extra $1,000 if you are 50 or older. However, most travel nurses don’t get close to the maximum contribution every year. For example, even if you contributed $100 per weekly paycheck, you’d set aside $2,600 per year.
The advantages of an IRA for travel nurses are clear. They are ideal because an IRA is a convenient way to control your retirement funds, no matter who you are employed by. Your IRA is solely yours. You can take it with you whatever you decide to do in the short or long-term future. With an IRA, you are 100% vested as soon as you sign up and have no waiting period in order to contribute. IRA’s are also simpler to manage and allow you to eliminate the fees associated with a 401(k).
At Travel Nurse Across America (TNAA), we are proud to offer our employees comprehensive benefits including retirement planning services through the EAP program with Vanguard. Vanguard’s experienced financial advisors are prepared to help each employee with their individual retirement needs through traditional and Roth IRAs, as well as help rolling over an existing 401(k) plan. Additionally, our specialists are happy to help employees who are interested in participating make convenient automatic deposits from their paychecks.
If you’re ready to start your travel nursing adventure with the ability to save for retirement with a flexible IRA you that goes wherever you do, apply today to get started!