You’re finally retiring. You’ve worked and saved for 25, 35 maybe 50 years and now that great day has come or is coming soon. But you are now facing with at least one more paramount decision. What to do with your 401k. It really is one of the most important decisions you will make for the rest of your life.
Okay, it is not on the scale of who to marry or whether or not to have children; but, it is way ahead of which new car or big screen TV to buy. But, for most, this decision is given very little research or attention. And for all, it should get a lot. So, I congratulate you for taking the time to do some research and I hope I can simply explain some of our options.
For the most part, the biggest part of the problem is that we really are not educated about our options. Although this should be a 101 course in school, it is not and consequently we are left to dig and sort through all the information and mis-information out in the internet ether by ourselves.
But before we get into your rollover options, the first question is to rollover or not to rollover. If your soon to be former employer has a great, low cost, many options plan, with a great track record and they will allow you to stay then this might be the best bet. This is rare; but ask and you may be pleasantly surprised.
If your account is in the multiple millions then you may want to negotiate with the IRS to take a lump sum and pay the taxes owed at a reduced rate by passing the rollover completely. If you are not sure if this can apply to you then check with a good CPA and have them run the numbers and test the IRS deal making waters. If you are not in this bracket then a lump sum is usually very costly tax wise and not a recommended option.
For the rest of us who will need to leave the old plan and can negotiate like the big boys we will cover the options you have once you do decide to rollover the 401k. However even if you’ve decided to stay put with your current plan or negotiate your tax burden away, please read on as there are important details of which you may not even be aware and most of these options are available both inside and outside of a retirement account.
Banks, brokerages, insurance companies, independent financial planning firms and money manager are just few of the overlapping optional new homes for your retirement savings.
The where is less important than the what. For the most part all, any of these avenues, even the independents that use the big clearing houses (LPL Financial, National Financial Services, Ameritrade, Schwab ect. )