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Should Retirees Keep Their Retirement Savings in 401(k) Accounts or Transfer Them to IRAs?


If you are puzzling over the decision of whether to keep your money in your employer-provided 401(k) account or move it to an individual retirement account (IRA) after you retire, count your blessings.  This is a good problem to have.  More than a third of American adults who work full time in the private sector do not even have an employer-provided retirement account, and as the gig economy continues to grow and take up an even greater share of the workforce, your situation is going to seem even more desirable.  Unfortunately, getting the maximum financial stability out of your retirement savings is not as simple as it sounds, even if you do not take into account financial decisions such as continuing to reside in your empty nest or downsizing to a smaller and less expensive house.  When you make plans for your future, you should start with a realistic budget based on your Social Security income plus your withdrawal from your 401(k) or IRA.  For help taking a realistic view of your retirement finances, contact a Dade City estate planning lawyer.

401(k) Are Low Maintenance, but They Have Hidden Costs

The beautiful thing about a 401(k) is that it is a “set it and forget it” retirement account.  You enroll in the retirement account and set your monthly contribution, and then you just continue your work and watch the quarterly statements come in with details about how your investments have grown.  Your employer manages the 401(k) accounts of all of the participating employees, and your employer as a fiduciary duty toward the account holders.  This means that if the investments lose money, your employer must move them to less risky investments.  Rarely will you see your 401(k) lose money for two quarters in a row.

What you don’t see is that 100 percent of your contribution does not go into your account. Some of it goes to pay the administrative fees associated with maintaining the account.  The desire to save on those fees and be the boss of your own retirement savings is a major motivation for employees to move their money to IRAs when they retire.

IRAs Require More Work and Finance Knowledge on the Part of the Retiree

The administrative and maintenance fees on IRAs are low, and sometimes they are zero, but you don’t appreciate all the work that your employer did on your retirement savings until you have to do it yourself.  It takes practice to manage your IRA so that it does not leave you with substantially less retirement savings than you thought you had.  Therefore, many retirees who move their savings to IRAs end up paying financial advisers to manage their IRAs.  A third option also exists, which is to withdraw all the money as a lump sum and pay taxes on it all in one year.

Contact a Florida Estate Planning Attorney About Finding the Right Place to Spend Your Retirement

An estate planning attorney can help you make wise decisions about your retirement savings.  Contact The Law Office of Laurie R. Chane in Dade City, Florida to discuss your estate plan.


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