Retirement
I am about to Retire; What is next for my 401K?
By Jason Cunningham
Apr 30, 2007 - 6:43:21 PM

When you retire, you will need to make some decisions concerning your 401K. You might wish to open up a IRA rollover or just leave it with your current employer. On the other hand, some individuals cash in their 401K plan.

Leave your 401K in the Company Plan

Many companies will not force a retiree to move their 401K. You can leave the retirement account in the same funds or makes some changes to the current asset allocation. If you are at least 55 years old, retired or separated from your company, you will have access to your 401K without the 10% early withdrawal penalty.

Disadvantages of leaving the 401K with your current employer

In most 401K plans, there are limited number of investment options. You may not be able to pick your favorite mutual fund or match your current risk tolerance. In a 401K plan, you are usually at the mercy of the company's investment choices.

Cash Out the 401K

Assuming an individual is at 55 years and retired, he or she will be able to cash in the 401K account. However, he or she may incur a larger than normal tax bill.

Roll Assets into a IRA

Many people use a Rollover IRA for estate planning. This can be a useful retirement tool when you do not need to live off of these assets.

Conclusion

Upon retirement, you have several options when deciding what to do with your 401K Plan. One solution does not fit all situations. Be careful to evaluate the risk and reward. Please contact your financial consultant or tax advisor.