Retirement Saving: Plan Options To Consider When Starting a New Job

Eva-Katalin /

If you’re just starting out in your career, you’re probably not putting too much thought into retirement. But even though it’s likely decades away, it’s never too early to start saving and planning.

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If you do want to start saving for retirement (which you should!), it can be difficult to navigate the various options that may be available to you. Here’s what you need to know about your retirement plan options.

What To Know If You’re a Full-Time Employee

Many employers offer retirement savings plans to their full-time employees. This will often come in the form of a 401(k).

“A 401(k) must be sponsored by an employer and has the possibility of offering a match,” said Andrew Meadows, SVP at Ubiquity Retirement + Savings. “One of the best parts about a 401(k) is the ability to save more than any other retirement vehicle. For 2022, you can save up to $20,500. For those new to the workforce, you might not be making enough to hit this limit, but the limit is much higher than if you opened an IRA; the limit for contribution to an IRA is only $6,000. While an IRA has a much lower barrier to entry, the rewards — and often the investments — provide a much more value long term.”

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However, it’s important to understand how a 401(k) works. Even though this is your money for retirement, you can’t withdraw from it early without penalties.

“If you’re a full-time employee with an employer, the easiest way you can take your money out is when you leave your employer,” Meadows said. “That said, saver beware: there are penalties for taking money out prior to retirement amounting to 10% of the total amount.”

You also need to understand the details of your particular employer-sponsored plan.

“Review your enrollment kit and understand your plan provisions,” said Whitney Jones, AIF, CPFA, retirement plan specialist at Premier Wealth Management. “Plan to enroll at the next entry date into the retirement plan and determine if there is an employer match that you would be eligible for. Often, the employer match is subject to a vesting schedule — which is another term for ownership — so be sure you understand what is offered.”

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What To Know If You’re a Part-Time Employee or Contractor

If you don’t have access to a 401(k) plan through your employer, you still have options for saving for retirement.

“You have much more flexibility and options ahead of you, but much of it is DIY,” Meadows said. “Even though 401(k) [plans] are made for employers, any contract employee can make themselves their own employer by signing up for an EIN (Employer Identification Number) directly with the IRS. By making yourself a company in and of itself, you can sponsor your own 401(k) and receive all the benefits of contributing to it as an employee.”

Being your own 401(k) provider also allows you the opportunity to contribute more to your retirement each year.

“The employee portion of saving is $20,500, and you can provide your own profit-sharing contribution. Depending on how much you’re bringing in, you also have an option to contribute to yourself, which would bring up your total contribution maximum to $61,000 per person,” Meadows said.

Even if you are your own 401(k) provider, there are still penalties for early withdrawals. However, you may be able to get around this.

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“If you’re a contractor, make sure you’re setting up a 401(k) with a loan provision,” Meadows said. “As a retirement plan provider, it’s very hard to tell entrepreneurs that the only way they can access their funds is by terminating the plan. Not only do you have to wait one year until you can open a new one, but you’re also hit with a penalty and you’ll have to start from square one. The alternative is to find a plan provider that offers a loan provision so you have access when you really need it.”

You may also open an Individual Retirement Account (IRA) as an alternative retirement savings option.

What Everyone Should Know About Saving for Retirement

Regardless of the retirement savings vehicle you choose, you should be regularly contributing to it.

“No matter the vehicle — 401(k) or IRA — make sure you have a savings plan,” Meadows said. “Budgeting is one of the most important decisions in helping define how much you can actually afford to pay toward your ‘retirement bill.’ By simply making a line item in your personal budget, you’ll have an idea of how much you can contribute, and that will help you define your savings goal. Since most folks tend to budget based on take-home pay, you can put yourself in a situation where you set the amount and check in on it once a quarter.”

Although you may not be able to contribute much to your account when you’re just starting off in your career, every little bit counts.

“Start small with your savings plan,” Meadows said. “This number is different for everyone. For many savers, they are often motivated by the employer. If an employer is providing a 4% match, you may want to save up to 4% so you maximize on the match while doubling your savings potential. Ultimately, it’s up to you.”

This may mean making some sacrifices, but the tradeoff will be worth it.

“You may realize that by bringing your lunch to work a few days a week instead of going out to eat, you can free up some otherwise ‘claimed’ dollars to contribute to your plan,” Jones said.

The good news is that by starting to save early, your retirement savings have more time to grow.

“The best part about retirement savings is the magic of compound interest,” Meadows said. “Picture it like a snowball. The more you have saved, the more you will save due to the ‘snowball’ rolling down the hill toward retirement.”

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 
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