Financial Advice Q&A

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cwbarg
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What should we do with our 401(k)s when we retire?
[ Edited ]

My wife and I are both 66 years old. My wife is retireing in May and I will be retiring in about 2 years. We both have 401K accounts with our employers. What should we do about these accounts so we can keep as much money as possible and perhaps earn more from them? Thanks. Charles

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Community Manager
ScottHalliwell
Posts: 886

 

Thanks for the question, Charles. And congratulations on your upcoming retirements! 


401(k) and 2 nests - shutterstock 149579720.jpgUltimately, you'll likely have three high level choices of what do to with your 401(k)s. Typically you can leave them alone, roll them to an IRA, or cash them out (which is rarely a good idea). I encourage you to take a look at this Old Retirement Plans blog post I wrote. It should give you some good insight into why people will often choose one path over another.

As for how to handle your 401(k) money from an investing perspective, that's going to depends on several things. Here are a few of the big ones though:

  1. What you need the plans to do for you 
  2. The rules of your current plans 
  3. Your preferred approach to investing 


Let's take a more in-depth look at each of these points.

What you need from them
Because investing involves the chance of loss, I tell people they should never take more risk with their portfolios than is necessary to achieve their desired goal. In keeping with this, your first step should be to define your retirement income goals. Once that's defined, you'll be in a better position to determine your best approach to investing your money. Maybe your existing plans contain the investments you need to accomplish your goals, or maybe they don't. If not, then rolling the plans to IRAs might be the better move. Before you can decide though, you've first got to define what you need the money to do for you.

Plan rules
Another big consideration will be the withdrawal rules of your particular plans. Some plans allow withdrawals any time you wish and some plans restrict your access. If you need regular access to your money but your plan doesn't permit it, a rollover might be the better move. In the end, this piece isn't about whether or not the investments are right. It's about whether or not you can access you funds as you need them.

Approach
Finally, you'll want to consider your preferred approach to investing. Are you someone who needs a lot of guidance and instruction or is your situation such that you really don't need much help? If you're in the "I need help" category, then rolling the accounts to IRAs might be the better move since 401(k) providers don't often offer much in the way of investing assistance.

As I mentioned earlier and outline in the blog post above, the truth is there's a lot more that goes into this decision than just these few points. Even so, these three often weigh pretty heavily on this decision so I encourage you to consider them carefully as you decide which direction to take.

If you'd like to get some assistance with this decision as well as planning your retirement in general, you might want to contact our team of Financial Advisors here at USAA. They can be reached at 800-771-9960 and will be able to work with your specific situation to help you decide how to structure things.

Thanks again for your question. I hope this helps and I wish you both long and prosperous retirements!

Scott

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