401(k) Retirement Decisions

The recent study by J.P. Morgan found that 42% of participants still had their 401(k) accounts in their employer plans 3 years after retirement, a significant increase from 10 years ago.

The changing landscape of employers, financial firms, and regulations has led to a decrease in the number of financial advisors providing advice on IRA rollovers.

A departing employee typically has 4 choices: leave the money in the 401(k) plan, transfer it to a new employer plan if available, take a lump sum distribution, or roll over the account to an IRA.

Assuming you're retiring, transferring the money to a new employer plan isn't an option.

Taking a lump sum distribution can be a good idea if the 401(k) holds appreciated employer stock, as it allows for a special tax break known as net unrealized appreciation (NUA).

Most 401(k) plans have improved significantly over the years, but many still have drawbacks.

To determine if a 401(k) plan is suitable for you, look for features like low expenses, reasonable investment fees, and other expenses.

A good 401(k) plan should offer more asset classes than the basic five or fewer offered by some plans, with consistently good long-term performance.

When deciding between an IRA and a 401(k), consider factors like investment options, annual fees, transaction fees, flexibility, and communication.

Ultimately, the decision to stay with a 401(k) plan or roll over to an IRA depends on your individual needs and preferences.