Retirement- Should You Leave Your 401(k) With Your Employer?

Presented by Marc Aarons

I thought I’d quickly reach out about an interesting trend I’ve seen with my retiring clients. More and more plans are offering retirees the option of keeping their funds in their employer-sponsored 401(k) upon retirement. Since this is relatively new, I wanted to explain the shift in thought and offer a few pros and cons as you think through your options.

The Shift in Thought

Plan sponsors are changing how they view 401(k)s. What used to be thought of as solely a vehicle for savings is now becoming a potential source of income during retirement. To facilitate that shift, more plan sponsors are adding in-plan annuities to their employees’ investment options.

As you near retirement, you may have the option to leave your assets where they are. Here are a few things to keep in mind as you decide.

Pros and Cons of Not Rolling Over Your 401(k) to an IRA

Pros:

• Leaving your 401(k) account with your employer may help you save on fees, since they can buy funds at institutional pricing rates.
• Company 401(k) plans have access to stable value funds similar to money market funds but with better interest rates.
• Funds in a 401(k) are protected by federal law from creditor judgments (other than IRS tax liens and spousal or child support orders), including bankruptcy.
• If your plan includes an annuity option, you could potentially receive guaranteed lifelong payouts similar to a pension.

Cons:

• You can’t make new contributions, nor will you be eligible for any employer contributions.
• You may have fewer investment choices. A typical 401(k) plan has a few dozen funds to select from, while an IRA can provide thousands of options.
• You might have a hard time managing and tracking your savings if you have multiple accounts. Consolidating your retirement accounts by rolling your 401(k)s into a single IRA can simplify your financial life.

This is a lot to consider, but I’m here to help. As soon as you know your retirement date, start asking about your options, or better yet, give me a call, and let’s review them together. As always, I’m just a phone call or email away.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.