During this COVID season, many of my clients have been faced with uncertainty affecting their lives for now and in the future. In particular, I have a number of clients who chosen to retire now instead of waiting. Other clients have lost jobs because of the COVID shutdown. both cases have a common question, “what do I do with my 401k?”
The question may be the same, but the answers are very different. The 401k is a primary tool for funding a financially secure retirement. For those who lost their jobs, the choices may be leaving their money in the former employer’s plan (If they are able - not all plans allow former employees to do so, and businesses which had gone out of business will have to terminate their plans) or move the funds into a roll-over IRA. There are pros and cons for either option. The important point is to make sure you understand all the rules and ramifications to avoid making costly and irrevocable mistakes. I have seen the results of mistakes made and helped others to make wise decisions on how to handle their investment in their future. The key is to seek knowledgeable advice and make deliberate decisions.
For the retiree, the decisions are even more critical. Your priority is to make sure your money lasts as long as you need it, as well as if you want to have money left over for your heirs or favorite charities. Up until now, your 401k has been accumulating funds for the future. Once your retire, the future has arrived. Now the funds you have must begin to work for you as you start to take income. The accounts now must be reallocated to generate the income you need going forward. Again, there are rules and important tax and estate planning implications that will impact your decision-making. I have helped my retiring clients increase their income stream in a tax-efficient manner. Once more, retirees need to be very careful when deciding how their money should be managed to avoid making costly mistakes and possibly running out of money.
Whether you are changing jobs or moving into your next life’s adventure, find a guide who will give you the information you will need to make the right decision for you! I am passionate about helping people like you learn your options, understand taxation issues surrounding your various options, and designing your income strategies. I would be honored to help you as well.