Where to Move a 401(k) After Retirement

401k with coins

One of the many questions people have after they retire is, where should I move my 401(k)? If you’ve saved up a sizable nest egg in your 401(k) account, you may be wondering what to do with it after you retire.

You’re not alone. That’s a common concern for many Americans. But fortunately you have lots of choices. Let’s discuss a few of those and see which one might be right for you.

401(k) Options

Although we’re looking primarily at post-retirement 401(k) moves, most of what we’re about to discuss is just as relevant for those in the workplace as it is for retirees. The only thing you’ll need to be aware of as a non-retiree is the potential 10% penalty for taking distributions from certain tax-advantaged retirement accounts before age 59½.

But the options we’re going to look at can be just as relevant to those switching jobs or those who have orphaned 401(k) accounts with previous employers. If you’re wondering where to move your 401(k), you may not have to wait until you retire to do so.

1. Keep Your Money Where It Is

The easiest option is just to keep your money where it is in your 401(k). It shouldn’t cost you anything more than you’re already paying in expenses, and it saves you the effort of moving the funds elsewhere. The only thing you’ll need to worry about is taking your required minimum distributions (RMDs) when you turn 73.

You may also like your current 401(k) plan, and it may offer cost-effective options or diversification vis-a-vis your other investments. In that case, if it ain’t broke, why try to fix it?

The disadvantages to leaving your money in your 401(k) are the opportunity cost of doing so. You could potentially be missing out on more lucrative investment opportunities, better diversification, or the ability to invest in a wider array of assets.

If your 401(k) plan is limited in its investment options, or if it limits your investment options once you retire, you may also find that its performance is subpar after you retire. As with everything investment related, you’ll need to familiarize yourself with the rules of your 401(k) plan and compare it to your other options.

2. Start Taking Distributions

Another option once you retire is to start taking distributions from your 401(k) account. As long as you’re at least age 59½, you can take distributions penalty-free. You’ll just have to pay taxes on your distributions, and at age 73 you’ll need to start taking RMDs.

The downside to taking distributions is that you would be missing out on the opportunity to make even more investment gains. Let’s say that you retire at age 62 and have a nice nest egg built up in your 401(k). Taking distributions means that you’re missing out on 11 more years of potential investment gains before you have to take RMDs. That’s time (and money) that you may never get back.

Of course, if you really need the money that’s one thing. But if you have other assets you can draw on, or a pension or Social Security income that can help support you, you may not need to draw on your 401(k) assets.

Again, every individual is different, and your decision to take distributions from your 401(k) account should take your financial situation into account.

3. Roth Conversion

Most people with a 401(k) account invest in it with pre-tax dollars. But an increasing amount of people are starting to save in Roth 401(k) accounts, with 28% of workers saving in Roth 401(k) accounts and 88% of workplace plans offering these Roth 401(k) accounts.

Roth accounts invest with post-tax dollars, but offer the advantage of not having to pay taxes when you take a distribution. And for tax year 2024 and later, Roth 401(k) accounts will no longer be subject to RMDs, just like Roth IRAs are already not subject to RMDs.

If your 401(k) plan offers a Roth 401(k) option, you could move funds from your traditional 401(k) into a Roth 401(k). The downside to that is that you would have to pay taxes on that conversion. But if you undertake that conversion once you’re retired, and once your income is lower, you might be able to reduce the tax burden of that conversion.

As with all things tax-related, you’ll want to talk with a tax professional and financial advisor to see if that makes sense for you, and to walk you through the potential pitfalls of a Roth conversion.

There’s also the possibility of converting your 401(k) balance into a Roth IRA through a 401(k) rollover, which we’ll cover in the following section on 401(k) rollovers.

4. 401(k) Rollover

A 401(k) rollover is a popular option that can help open you up to a greater variety of investment options. When talking about a 401(k) rollover, it’s generally assumed that you’re rolling over funds from a 401(k) account into an IRA. There are three different ways this can happen.

  • Rollover from a 401(k) to a Traditional IRA
  • Rollover from a Roth 401(k) to a Roth IRA
  • Rollover from a 401(k) to a Roth IRA (Roth conversion)

Note that you can’t roll over funds from a Roth 401(k) into a Traditional IRA.

Let’s look at the first type of rollover, which is probably the most common and most popular. In this rollover, from a 401(k) to a Traditional IRA, you’re rolling over funds from a pre-tax funded 401(k) into a pre-tax funded Traditional IRA.

As long as the transfer is done directly to your IRA custodian, the rollover occurs tax-free. If you opt for an indirect rollover, meaning funds are sent to you and you then send them to your custodian, you have 60 days to deposit those funds with your IRA custodian, otherwise you’re subject to taxes, and potential penalties if you’re under age 59½.

With a rollover from a Roth 401(k) to a Roth IRA, you’re looking at largely the same rules and regulations, with one important addition. Roth IRA accounts are subject to a five-year holding rule, meaning that, while you can withdraw your contributions at any time, you can’t withdraw your earnings until you’ve held the account for five years. So if you don’t already have a Roth IRA and have to start a new one, your funds would become subject to that five-year rule, which could limit your access to your money.

With a 401(k) to Roth IRA rollover, which would be a Roth conversion, you’ll have to pay taxes on your conversion, just as you would if you were to convert your 401(k) into a Roth 401(k). So if that’s something you choose to do, you would want to consult with your tax advisor before doing so.

IRA vs. 401(k)

The question you might have is, why would I want to roll over assets from my 401(k) into an IRA?

For one thing, an IRA account often offers significantly expanded investment options. With many brokerages, IRA accounts can invest in thousands of individual stocks, exchange-traded funds (ETFs), mutual funds, bonds, and other financial instruments. Compare that to your 401(k), which limits you to the options offered by your plan administrator.

There’s also the fact that you have the option of starting a self-directed IRA and being able to invest in an even wider range of assets, such as real estate, commodities, and precious metals like gold and silver.

A gold IRA is a form of self-directed IRA, and it allows you to invest in physical gold coins or bars. Unlike an ETF or gold fund, in which you own shares in a fund that owns gold, a gold IRA allows you to own actual gold coins. You choose the coins you want to buy, they’re stored at a bullion depository and managed by your gold IRA custodian, and when you take a distribution you can take it either in cash or in gold.

Many Americans have already taken advantage of the opportunity to start a gold IRA and protect their existing tax-advantaged assets. With a 401(k) to IRA rollover, it can be quite simple to roll over funds from a 401(k) into a gold IRA.

The Rollover Process in a Nutshell

Most 401(k) to IRA rollovers will work in much the same way. You’ll need to first start an IRA, then contact your 401(k) plan administrator to start the rollover process. You’ll need to provide your plan administrator with your IRA custodian’s name, address, and your IRA account number.

Most 401(k) plans will require you to fill out paperwork to confirm your rollover. Once the process is started, expect it to take 1-2 weeks to get your funds from your 401(k) to your IRA. Then your IRA funds are ready to buy whatever IRA-eligible assets your custodian will allow.

In the case of a gold IRA, you’ll need to remember that only certain gold coins are IRA-eligible, namely American Gold Eagles and any coin with a fineness of .995 or greater. Goldco works with mints around the world to bring our customers IRA-eligible gold coins so that they can ensure that their IRA assets are being used to purchase only IRA-eligible assets.

Want to Learn More?

If you’re looking to move your 401(k) after retirement, and if gold is something you’ve thought about, maybe it’s time to look into a gold IRA. With the ability to perform a tax-free rollover from a 401(k) account into a gold IRA, you don’t have to worry about incurring taxes and penalties when protecting your assets with gold.

With gold’s track record of great gains during and after the 2008 financial crisis, gold has also established itself as a safe haven and store of value during troubled times. That’s just what many Americans are looking for right now as the US economy faces a potential recession.

Many people have already started protecting their wealth with gold. Goldco has helped thousands of satisfied customers and made more than $2 billion in precious metals placements. We have the experience and the devotion to customer service that have made us one of the most trusted names in the precious metals industry. But don’t just take it from us, read what our customers have to say about our services.

And if you’re looking to protect your hard-earned money, call Goldco today to learn more about how gold can help you do that.


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