Beth Pinsker: ‘I’m retiring, so what do I do with my 401(k)?’ You have four choices — but only three of them are good.

by | Feb 25, 2023 | Stock Market

You have to make a lot of decisions when you retire, and among the biggest is what to do with your workplace retirement savings. No matter how much money you have or how you intend to invest it, you have to first choose where your nest egg will live.  You have four basic choices. 

Remain in your employer’s plan and just let the money grow until you have to start taking the required minimum distributions (RMDs).

Remain in your employer’s plan while taking installment payments. 

Roll over the assets to an IRA at an institution of your choosing.

Take the account balance in cash and pay tax on the distribution to either spend it or roll it into a Roth IRA. 

The good news, according to recent research from Vanguard, is that most people faced with this decision over 10 years, from 2011 to 2021, were able to preserve their retirement dollars. Seven out of 10 kept their assets in a tax-deferred environment, and 90% of the money stayed invested, and presumably, grew a bit. Average balances ranged from $239,300 to $418,900. “More and more investors are on the right road to having a good experience with accumulations. We’re seeing improvements,” says Matt Brancato, chief client officer for Vanguard Institutional.  But, Brancato adds, “the average doesn’t tell you about individual experience.” And for that, you have to look at some of the less good news, which is that Vanguard found that 30% cashed out their savings at age 60 or later, most with smaller balances. The average amount of these accounts was $39,700. Some had likely simply saved less, and some had been with the company plan for a short time, so …

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