If you’re close to retirement, one crucial aspect to consider is what to do with your hard-earned 401k savings. This decision requires careful thought and planning, as it can significantly impact your financial well-being in the long run. James covers the key considerations to get the most out of your 401k plan:
➡️ Analyzing Costs
➡️ Assessing Control + Ease of Use
➡️ Examining Investment Options
➡️ Consolidations for Simplicity
➡️ Coordinating Withdrawal Strategies
In addition to those factors, there are several other important considerations: understanding tax implications, net unrealized appreciation, and penalty-free distributions.
Learn the tips & strategies to get the most out of life with your money.
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⏱ Timestamps ⏱
0:00 Intro
1:58 Costs
3:14 Control
5:04 Investment options
6:41 Consolidations
8:21 Ease of Use
9:10 Coordination
10:39 Tax implications
12:17 Net unrealized appreciation
13:24 Penalty-free distributions
14:21 Outro
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Ty for a clear explanation. I did the in-service rollover when i hit 59.5. Do you have suggestion on where to invest pre-taxed ira? Are treasuries a good option?thank you.
Prior to my retirement, I started rolling over my 401k to my TDA account. After retirement, I rolled my pension over also. To me, having my own direct access and investment choices works best for my strategy .
Be careful when moving 401k funds to IRAs. I wanted to move only the company stock out to a brokerage account but apparently , by selecting only the stock, the IRS requires that the entire 401k balance be transferred by year end to an IRA.
What Should You Do with Your 401k When You Retire? Convert it to SPY by transferring your 401K to your brokerage account and use the dividend payout (1.5% + SS) and live happily ever after while your capital appreciates. I am assuming you have $4M of S&P 500 ETF like SPY that will give you 60K + 20K from SS and that should be enough for day to day. For big spend sell some of your capital appreciation. Remember your capital is appreciation 10%. Got it? Thank me later.
I'm 62 and retiring in 6 weeks. I have 2 options with my 401k, traditional and Roth. Most of my money is in the traditional side. I wanted to keep my money in the 401k but they do not allow Roth conversions. Therefore, I will be moving all my money to Vanguard which will allow me to do the conversions before the RMDs hit. I have all my investments in stock because I don't need it for retirement. I will leave it to my children to help them with their retirement.
I accidentally stumbled on some amortization software in 1997. When I realized the real cost of debt, I was completely debt free by 2008, and fully funding all my retirement savings opportunities including Roth IRAs and 401Ks. Now we are living in a brand new luxury home with a new car (and one 3 yo car) all paid for in cash. We need 55-70k a year to live, and most of that is covered by my pension. All those investments are just compounding… and we couldn't be happier!
My companies 401k fees through Fidelity are so cheap(large company) that I don’t see the need to move to IRA.
PLEASE Do a video on a how nua works with company stock.
what I'm finding is the company hosting the retirement plan fights you tooth and nail to keep you from doing a rollover out.
this should be illegal, but of course isn't.
Do not forget that the cost of your 401(k) while employed may change when you retire. Some companies subsidize for their employees but less or not at all for former employees.
Also when you consider a rollover to an IRA, if you want to keep the same funds as your 401(k) you may discover that to be impossible or your desired funds cost more when purchased thru an IRA.
I'm definitely doing a rollover. My 401(k) is okay but expensive and I prefer different investment options. Also, my 401(k) plan does not allow partial distributions (this may be changing) so the lack of withdrawal flexibility, the lack of investment flexibility, the lack of provider flexibility… An IRA is the more flexible choice (at least once you hit 59.5) and in my case will be cheaper as well.
I'm not liking the 401k or Roth casinos. Nice to have but we are one terrorist attack or "new banking failed product" away from them evaporating. I am socking cash into an annuity until it is full up to $250K point and retiring to South America where the money goes twice as far. Stll have the investment accounts, but never felt they were ever going to sustain my retirement at all no matter how much was in them.
Not useful at all….way too basic.
Yeah, forget HR except to figure out how to get your money out of there when you separate from the company.
I've moved all my 401k's into IRA's and into low cost mutual funds and ETF's where I can control the mix and even some trading if I want to. Some of the company funds I've had were low cost, but just not as flexible or as much choice.
Those investments you speak of are losing thousands monthly.
People should be putting their money into Certificates and/or in buying prime real estate.
Blow it before you die, is also a good option
Retiring under the Rule of 55T, I will be bound to my 401 until 59.5. Luckily for me, we have a few good options to leave my money invested in.
Are annuities a good option to roll into at retirement
I moved my retirement accounts from TIAA to Vanguard after retirement. Vanguard is a lot cheaper! The only hassle was that TIAA required my wife to notarize some paperwork.
James, I rolled a 403b balance from an exemployer this past December. I put the funds in a new Traditional IRA account with M1 Finance. I went from mutual fund fees to a "payment for order flow" structure as I invested in individual stocks. Not really sure what that means. Looking for input from you or anyone else on if that's a bad or good thing.
Great options of course, what about a in kind transfer to exercise a NUA??
How come fixed indexed annuity insurance contracts is not being mentioned as an option? Not mentioning this as an option for a portion of people’s retirement funds appears to be a glaring hole in your presentations.
Another consideration is that Qualified Charitable Distributions (QCD) are not permitted with 401k/403b plans like they are with traditional IRAs. For those charitably inclined, a QCD is a great tax-efficient tool that counts towards fulfilling some or all of one's RMD. Also, RMDs must be taken separately from traditional IRAs and 401k/403b plans. However, if one is working past RMD age at the 401k/403b employer, no RMD is required on that account until the year one retires.
Good advice. Being that I want to retire at 55 and desire to access some money as well as make some Roth conversions I am beholden to my 401K until at least I turn 59.5.I can't use the rule of 55 if I roll it over right at retirement.
You can withdraw from your 401k at 55 if you leave. You cannot access an IRA until 59 1/2 without a penalty.
I recently retired at age 55, and I’m Ieaving my 457 plan alone because the fees are low, the investment options are reasonable, and it’s easy to exchange funds, set up distributions, etc. However I have a few older poorly performing 403b’s that I’m trying to roll into that 457 account, and that is proving to be a pain in the butt. I just want things in only 2 or 3 easy-to-use places overall, and if those 403b’s drag their feet too much, I’ll just withdraw the money and put it in an IRA within 60 days. It really shouldn’t be that tough!
Very informative info. Thank you for posting!
Can I rollover a large chunk of money about 250K to a tradional IRA and still receiving my company 401K if I still working for the company at my 67 year old age?
My 401K plan offers a self-directed option. What are the advantages and disadvantages of using that option?
Another thing to consider: you may be fine with having money in various 401(k)s with various previous employers, but if something happened to you and your spouse suddenly has to manage all of it this may compound the problems they’re dealing with.
Good presentation !
So far, I am very happy with leaving my 401K after retirement. I have paid no excessive fees and when I take my RMD it has been covered by my growth. I watch my 401K everyday just to keep in touch and make sure that a move to personal IRA might be better.
Who makes the Tshirt you are wearing in video?
I live in a state (GA) that does not protect IRA’s from lawsuits. 401k’s are Federally protected ERISA plans. I retired with a 17 year old driver. I’m keeping my retirement savings protected in my former employer’s 401k for now.
These are the right considerations. Cost matters a lot.
Excellent discussion – particularly the last third.
Additional considerations about 401K decisions…
1) While for smaller balances, fund fees might not make a big difference, many 401Ks employ institutional funds with lower fees… while with IRA’s you’ll be in retail investor funds with typically slightly higher fees.
2) Might be worth checking with an attorney about retirement account legal and debt protections – in some cases your protections from bankruptcy or lawsuits might be stronger for funds inside a 401K vs an IRA.
3) Regarding the retirement phase… in my case, a huge problem – we cannot direct which funds to withdraw from!?! That is, all withdrawals (and Roth conversions as well as IRA rollovers) are pro-rated across all your 401K investments. So you cannot employ a “bucket strategy” for near term “cash” withdrawals. Also 401K’s sometimes require you to pay a flat fee every time you do a withdrawal, unlike IRAs.
We are considering rolling some but not all of our 401K funds into an IRA so we can have more control over the near and midterm needs portions.
my worst first attempt…annunities….bad bad bad idea….cost me two years and eight percent penalty to get some of my money back….got advice and bought good stocks….money back in about a year….wait on social security as long as you can…it pays for itself….
Very helpful information!
I rolled a portion of my 401k to a new employer which I worked till I was 55 and learned the new employer plan does not allow withdrawal after 55. Not interested using 72t, how else can I withdraw without penalty?
Been retired for five years and left my money in a very good 401k. However, for reasons unknown the company up and decided to move to another Insurance run 401k provider. Before when I wanted to make a withdrawal, it cost me nothing and I could take it across all my investments or choose the investment to withdraw from. Now, this new outfit charges me $40 every time I wish to withdraw my own money and I MUST only take it across all investments. Now, I decided to possibly do a rollover to an IRA and have learned that they won't even do a wire transfer so the check will have to float around until it gets to the brokerage via mail service which does not set well with me one bit. Also, I was informed that due to all of this I would probably be out of the market two to possibly three weeks at a time that the portfolio is coming back from last year's beat down. Far more complicated than it should be in my opinion.
The best thing I did with my 401(k), was converting it into a self directed IRA. You can almost get the exact same investments in a brokerage company like Fidelity, Schwab or Vanguard but now you have full control over yourself and you don’t have to go to your program administrator or any hassles. And I did this with an older 401(k) years before I retired. It almost felt like they were happy that I took it out being I didn’t work there anymore just the feeling I got.
Great video with a clear presentation of the options and their various pros and cons. One option you didn’t mention that my 401k offers is to convert my balance to a single or double life annuity. I only recently discovered this option and was wondering whether it was a good idea.