Can I Contribute to My 401(k) After I Quit?

You may have elected to take your current job because it was one of the companies with best retirement plans. However, if you leave your job, you may wonder how you will continue saving money for retirement, particularly if you depended on your previous employer's 401(k) plan as an investment vehicle. After you quit your job, you cannot continue making contributions to a 401(k) plan sponsored by your previous employer. However, you can take advantage of several other options to continue building funds for retirement.

If you have at least ​$5,000​ in your 401(k) account, your employer's plan administrator must allow you to leave your money in your account. Although you can no longer make contributions to your 401(k) plan after you leave your job, the amount you have already contributed to your account can continue earning money for you.

If you choose to keep your 401(k) account active, you can use the money you would have contributed to the plan to fund another type of investment, such as an individual retirement arrangement (IRA) or stock purchasing account. It is always smart to continue investing with the largest retirement plan providers since they will have the most options.

If you have not secured employment with another company, or if you decide to go into business for yourself instead of looking for another job, you may roll the funds in your 401(k) account into a traditional IRA without incurring taxes or penalties. These funds include earnings from your contributions as well as any vested contributions from your previous employer. You can then contribute to your traditional IRA as you would to a 401(k) plan.

The advantage of rolling the funds over is the continuity of the tax-deferred accruing of money for retirement even if you can't contribute to it.

​Read More:​ Roth vs. Traditional IRA for Young Investors

If you have secured new employment and your employer offers a 401(k) plan, you may roll the funds over from your old 401(k) plan into the new plan. Like an IRA rollover, a rollover into a new 401(k) plan is not subject to taxes or penalties. Again, this is another tax-deferment option for keeping those retirement funds from penalties until the appropriate retirement age.

If you decide to roll your funds over into a new 401(k) plan, check with your new employer to determine if there is a waiting period. Some employers require you to maintain employment for a period of time before taking advantage of a 401(k) plan. If your employer's plan administrator imposes a waiting period, check with your previous plan administrator to make sure you can keep your funds in the old plan until the waiting period expires.

If you have ​less than $5,000​ in your old 401(k) plan, the administrator may roll the balance into an IRA. If the balance is ​less than $1,000​, the administrator may send you a check for the account balance, less penalties and taxes.

​Read More​: Do I Have 90 Days to Roll over My 401(k)?