As you enter retirement, is it best to move your pension fund and 401(k) from your employer account to your personal retirement account (IRA) and keep them under one roof?
– Randy
There are a few things to keep in mind when considering whether to relocate. retirement account After retirement. I’d like to start by considering how different decisions affect the plan. Also consider convenience.
In your case, I would separate the components into annuity and 401(k) separate decisions. (For more information on how to handle retirement savings, see Consider working with a financial advisor.)
pension transfer
When you retire with an annuity, you will typically receive a lump sum or choose one of several monthly payment options.
Instead of framing yourself pension When deciding whether or not to send money, properly consider which payment method makes the most sense to you in light of your other sources of income and overall plans. Choose carefully and don’t rely on heuristics or intuition.
Assume that you choose the one-time payment option. In that case, the natural destination is the IRA. It is also possible to receive cash in bulk. However, this is seldom the best option as it is immediately taxable.
Transferring it to an IRA will allow you to continue to benefit from tax-deferred growth and actively manage your taxes. (For more information on how to handle retirement savings, see Consider working with a financial advisor.)
401(k) forwarding
Employers incur costs to maintain the environment. 401(k) plans, they can be transmitted to you. If that’s your plan, transferring your account to an IRA can also help you avoid those fees and reduce your total spend.
Sometimes these fees are charged directly by the plan, and sometimes fund options include these fees due to higher expense ratios. Plan administrators may also be responsible for participant fees. I need to check the plan to confirm. Be sure to compare the fees you pay with your IRA. Remember: you can shop.
rolling 401(k) to IRA Potentially more flexibility and investment choices. This depends on where you open your IRA. Of course, you are free to choose. Again, be careful with your decisions and choose a brokerage firm that offers the features and services you need.
A particularly strong planning factor to consider is your age and whether your plan allows withdrawals at age 55 without penalty. “Rule of 55” If you retire before age 59 1/2, this is a big advantage. This allows you to receive your share from the plan without incurring her usual 10% early withdrawal penalty. Of course, if it’s already over 59 1/2, or if it’s not on the plan, that’s moot. (For more information on how to handle retirement savings, see Consider working with a financial advisor.)
next step
If you decide to transfer your pension, 401(k), other accounts and retirement plans from your former employer to your IRA, it’s often best to move them all into the same account. This makes things easier to track and manage.
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Consider several advisors before committing to one. Finding someone you trust to manage your money is important. Considering your options, These are the questions you should ask An advisor to help you make the right choices.
CFP®’s Brandon Renfro is a SmartAsset Financial Planning columnist answering readers’ questions about personal finances and taxes. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Brandon is not a participant in the SmartAdvisor Match platform and was paid for this article.
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