As you get closer to retiring, should you keep your 401k, or should you consider moving it to a different investment vehicle? 401k’s are a great investment option while accumulating wealth, but once you retire, there may be better options out there. In this video, we discuss three reasons why you may want to move your 401k to an IRA or Roth IRA.

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Timestamps:
00:00 Should you move your 401k before retiring?
01:28 Reason 1. You’ll have more investment options
02:42 Reason 2. You’ll have more access to professional advice
04:01 Reason 3. The ability to do Roth conversions
04:37 Why might you not want to move your 401k?

Disclaimer: Since we do not know your specific situation, none of this information can serve as tax, legal, financial, insurance, or financial advice, and may be outdated or inaccurate. The information comes from sources believed to be reliable but cannot be guaranteed. This content is prepared for educational purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Peak retirement planning, Inc. is an Ohio based registered investment adviser and able to offer advisory services in Ohio and in other states where registered or exempt from registration….(read more)

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Should You Move Your 401k BEFORE You Retire?

Planning for retirement is a critical aspect of financial management. One of the pivotal decisions you will have to make as you near retirement is what to do with your employer-sponsored 401k plan. Many people are faced with the question of whether they should move their 401k before retiring or keep it where it is. It is a decision that requires proper consideration and understanding of various factors.

One popular option is to roll over your 401k into an Individual retirement account (IRA). This choice offers greater control over your investments and potentially lower fees. By moving your 401k to an IRA, you are no longer limited to the investment options provided by your employer’s plan. Instead, you can choose from a wide range of investment choices, including stocks, bonds, mutual funds, and more. This flexibility allows you to tailor your investments to your risk tolerance, goals, and desired retirement timeline.

Another advantage of moving your 401k before retirement is the potential for lower fees. In 401k plans, participants often have limited choices, and companies managing these plans may charge higher fees. By rolling over your 401k into an IRA, you open the door to select lower-cost investment options and fee structures, thus maximizing your retirement savings.

Tax implications are another aspect to consider when deciding whether to move your 401k. If you choose to convert your 401k to a Roth IRA, you will have to pay taxes on the converted amount in the year of the rollover. However, this can be advantageous if you anticipate being in a lower tax bracket during retirement. On the other hand, if you transfer your funds to a traditional IRA, you can potentially defer taxes until you begin withdrawing the funds during retirement. Consulting with a financial advisor or tax professional is crucial in determining the tax implications specific to your situation.

While there are clear benefits to moving your 401k before retiring, it’s important to weigh them against potential drawbacks. One disadvantage of rolling over your 401k is the loss of access to penalty-free withdrawals before the age of 59 ½. If you anticipate needing funds before reaching this age, keeping your 401k might offer more flexibility. Additionally, some employer-sponsored plans offer unique benefits such as company stock or specific investment options that could be advantageous to maintain.

Before making any decisions, it is crucial to assess your individual circumstances, retirement goals, and financial objectives. Consider factors such as your risk tolerance, time horizon, investment preferences, and financial constraints. Seeking advice from a financial professional will help you evaluate the pros and cons and determine whether moving your 401k before retirement is the right move for you.

In conclusion, the question of whether to move your 401k before you retire is not one-size-fits-all. It depends on various factors and individual circumstances. Nonetheless, the flexibility, potential lower fees, and control over investments offered by an IRA make it a compelling option for many. By carefully weighing the advantages and disadvantages and seeking professional advice, you can make an informed decision that aligns with your long-term financial goals and retirement aspirations.