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Keeping Your Money In Your 401(k) After You Retire Is An Underrated Strategy


Not knowing how to maximize your retirement savings after you retire is a good problem to have.  If your biggest worry is how to grow your employer-provided retirement savings, your financial situation is what most people can only dream of.  Complaining that the balance in your 401(k) is only the amount you deposited into it over the course of your career plus your employer-matched contributions plus some interest is the ultimate humblebrag, especially if you do it on Facebook, where all the envious Baby Boomers hang out.  No matter what you do, your employer-provided retirement account will provide you with some income.  The question is whether you can get the most money over time by keeping the money in your 401(k) or moving it somewhere else. For help making a realistic budget based on your retirement savings, contact an Orlando estate planning lawyer.

Keep it in the 401(k), Move It to an IRA, or Cash Out With a Lump Sum?

During your working years, a 401(k) is what separates the haves from the have nots.  You simply sign the 401(k) paperwork when you get hired, and then your employer deposits money into the account every month.  Employers who provide 401(k) accounts have a fiduciary duty to the employees who hold these accounts; therefore, if the investments the employer makes lose money, they must modify their investment strategies before employees lose even more money.  The cost of managing the funds of the 401(k) is built into the employee’s contributions.

By contrast, an individual retirement account (IRA), as the name suggests, is a do-it-yourself affair.  Some people whose employers don’t offer 401(k) accounts set up IRAs on their own while they are still in the workforce.  The usual option for people with 401(k) accounts is to move the money to an IRA upon retirement, so that you don’t have to pay your employer to keep managing the account.  This means that you must manage it yourself, which is risky unless you are experienced in investing, or pay someone else to do it, which also costs money.

The third option is simply to withdraw the money from your 401(k) when you retire and deposit it in your personal savings account.  If you do this, you will have to pay all the taxes on it upfront, but then whatever is left is all yours.  When this happens, you are free to start spending the money on your travels, place it in a trust for your benefit and that of your descendants, or give cash gifts to family members within the limits of the annual gift tax exclusion.  Which option you choose depends on your personal priorities and your family’s financial situation.

Contact Gierach and Gierach About Realistic Retirement Budgeting

An estate planning lawyer can help you plan for retirement with the money you have, not the money you wish you had.  Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.



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