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Can I Have More Than One 401(k)?

401(k) money

It is possible to enroll in more than one 401(k) at a time. In fact, it is not uncommon to accumulate several over a lifetime. This can occur in various situations.

Scenarios that Can Lead to More than One 401(k)

  • You may have a 401(k) account from a previous employer and enroll in a second 401(k) plan when you start a new position. This process could be repeated until you have accumulated several 401(k) accounts.
  • You may hold two positions simultaneously with two separate employers and enroll in a tax-deferred 401(k) plan with each employer.
  • You may work at a job and also earn money from self-employment. Individuals who are self-employed can set up and contribute to their own 401(k) plan, separate from and in addition to an employer-sponsored plan.

Keep Overall Contribution Limits in Mind

The IRS imposes limits on the amount you can contribute to a 401(k) in any given year. If you have more than one 401(k) account, these limits apply to your total 401(k) contributions. In 2020, the limit is $19,500. Additional catch-up contributions for employees age 50 or older are limited to $6,500 in 2020.

Another IRS rule limits the total amount you and your employer together can put into your 401(k) account. In 2020, that limit is $57,000, or $63,500 if you are 50 or older. It includes employee contributions, employer matches, and employer contributions. However, this limit applies to unrelated employers separately. This means, if you have more than one 401(k), you have more than one $57,000 (or $63,500) limit.

Individual 401(k) plans may set their own contribution limits which could limit your overall contributions. However, when it comes to catch-up contributions, it is to your advantage to have more than one 401(k). Normally, each 401(k) plan can decide whether or not to allow catch-up contributions. When you have more than 401(k), however, you can make catch-up contributions, provided you are 50 or older, regardless of whether the plans allow them.

When It May Not Be Smart to Keep an Older 401(k)

Although you are allowed to have more than one 401(k) account, that does not necessarily mean you should. If you are enrolled in more than one plan, compare them all as to fees and investment opportunities. If your current employer has a better 401(k) plan, it may be a wise decision to consolidate your 401(k) accounts. On the other hand, if an older 401(k) is better, it might be best to leave the funds where they are.

Consider Rolling Over an Older 401(k) Into an IRA

If you have more than one 401(k), you might consider rolling over the funds from your older account(s) into an IRA. This could give you much greater control over your investments. With an IRA, you can invest in any funds, stocks, or bonds you choose. Rolling over into an IRA may be the best way to go if you want a more active role in your own retirement planning. Our experienced agent is happy to review your 401(k) options with you.