I’m About to Retire—What Should I do With My 401(k)?

I’m About to Retire—What Should I do With My 401(k)?

You have worked hard & saved for your retirement but, now that it’s time to retire you’re not sure what’s next.  Well, believe it or not most people don’t understand all of their options concerning their 401(k) plans.  It is important that you look at each of your options and decide which one is best for you!

Can I Just Leave It Alone?

In most cases, yes.  Many plans allow participants to leave their money invested in their 401(k) after retirement.  Obviously, the contributions cease but the existing funds in the plan will continue to be invested in the market as they were before.  Some things to keep in mind when choosing this option are: cost & investment choices available.  Many of the funds that are available in a 401(k) have higher fees and typically your investment choices are limited. 

Guaranteed Income?

Another option is to roll the 401(k) over into an annuity.  While this may be a good option for some, it is important to look at the costs associated with this type of investment as well as the consequences for making distributions before the money is out of surrender.  Typically, an annuity will guarantee a return of around 2 or 3 percent which may be enough for some and for others may pose an issue in the future.  There are several different types of annuities available so it’s best to have a financial professional explain each one in detail.

Can I Move the Money to Another Account?

You can roll your 401(k) into a traditional IRA to continue receiving the benefits of a qualified plan.  Rolling your plan over will allow you to have more control over the investments in your account all while maintaining the tax deferred status.  These type of plans typically have lower fees than 401(k) plans and are able to be managed along with your other brokerage accounts. Rolling your 401(k) into an IRA puts you more in control of your assets however, you will either want to make sure you understand investments or have an advisor that will work with you.

Why Not Just Take It All Now?

Once you reach the age of 59 ½ you are absolutely allowed to take distributions from your 401(k) without any penalties but not without taxes.  For most, taking a lump sum of an entire retirement account is a bad idea.  Because retirement accounts grow tax deferred until the money is withdrawn, every withdrawal is taxed at the person’s effective tax rate.  The distribution of a large sum of money can put a person in the highest tax bracket.  This would mean that a good portion of the money saved will be spent on taxes.  Distributing the funds this way would also mean one would miss out on the compounding interest they could gain if the funds were left invested.

Reviewing these options with a Financial Advisor along with your personal financial goals can ensure you pick the option that best suits you!


By: Melissa Keiss

*Operations & Client Services for Charles B. Pyke, Jr.


 Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgements, required minimum distributions and possession of employer stock.  Please view the Investor Alerts section of FINRA website for additional information

*Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.

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