Blog Layout

Should You Leave Money in Your 401(k)?

Greg Lavelle • February 28, 2020

There’s a growing trend among new retirees. With increasing frequency, Americans are choosing to leave their retirement savings. According to data from Fidelity, 55% of workers leave their retirement savings in their former employer’s 401(k) plan for a full year after retirement. That’s up from 45% just four years ago.1
 
Why are retirees leaving their assets in their old 401(k) rather than rolling those funds to an IRA? There could be a variety of reasons. Workers may be happy with the plan’s investment options and administration. They may feel comfortable with the plan’s online access and other management tools. They might not need the money immediately, so they don’t have urgency to do anything with it. It’s also possible that some retirees may not be aware that they can roll their funds into an IRA tax-free.
 
While there are certainly benefits to keeping your assets in your employer’s 401(k), there are also good reasons to roll the assets into an IRA. If you’re approaching retirement, now is the time to consider your options for your 401(k), which may be your largest retirement asset. Below are a few factors to consider:

Investment Options 

If you’ve been in your 401(k) plan for a significant amount of time, you are likely familiar with the plan’s investment options. You may feel comfortable with your allocation and perhaps you even like the plan’s fee structure and performance.
 
However, your goals and risk tolerance won’t always be the same as they are today. Just as your investment strategy has evolved through your career, it will likely continue to evolve through retirement. What you’re comfortable with today may not be something you’re comfortable with in the future.
 
Generally, IRAs offer significantly more investment options than most 401(k) plans. That’s not necessarily true with every IRA and 401(k), but it is often the case. While a 401(k) plan may offer dozens of options from select providers, an IRA will often allow you to choose from a wide universe of stocks, bonds, mutual funds, ETFs, annuities, and more. That greater diversity of options can help you develop an allocation that is just right for your goals and risk tolerance, no matter how it changes in the future.

Management and Administration

You also may be comfortable with your 401(k) plan’s management and administration tools. Perhaps the website is easy to use. Maybe you have a dedicated support person within the plan administrator’s office. You know how to make changes and review your account, and you may not want to make changes at this time.
 
Again, though, consider whether it will still be convenient in the future to keep your assets in your old 401(k). If you’re like many retirees, you may have multiple 401(k) plans from old employers. You also might have IRAs and other investment accounts. It’s difficult to manage and adjust your strategy when you have accounts spread across multiple custodians and institutions. You could simplify the process by consolidating your qualified retirement assets into one IRA.
 
Also, when you reach 72, you’ll have to take required minimum distributions (RMDs) from your 401(k) and IRA. Again, that process may be inconvenient if you have to pull distributions from multiple accounts. If you consolidate your qualified assets into one IRA, you simply have to make withdrawals from one account to satisfy your RMD each year.

Income Protection

While you may not need to tap into your 401(k) assets today, it’s possible that at some point in the future you will need to take withdrawals from your retirement savings. Of course, it’s difficult to know how much you can safely take in a withdrawal each year. What if you live longer than you anticipate? What if the market takes a downward turn? How can you be sure your assets and income will last for life?
 
In most IRAs, you can use financial vehicles like annuities to convert a portion of your savings into guaranteed* income. You receive a regular consistent check that is guaranteed* for life, no matter how long you live or how the markets perform.
 
Historically, annuities with guaranteed income benefits have been more available in IRAs than in 401(k) plans. However, the passage of a new law, called the SECURE Act, creates the possibility for 401(k) plans to start offering these vehicles. Whether it’s through your IRA or 401(k), guaranteed income could give you a base level of financial stability confidence in retirement.
 
Ready to implement a plan for your 401(k) assets? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 
1https://www.marketwatch.com/story/more-americans-are-leaving-their-money-in-401k-plans-after-retirement-should-you-2019-10-31
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
19563 - 2019/12/16

Using Life Insurance to Protect Your Business: Key Strategies for Business Owners

February 11, 2025
As a business owner, safeguarding your enterprise against unforeseen events is crucial for long-term success. Life insurance offers several strategies to protect your business, ensure continuity, and provide financial stability during challenging times. Two primary methods are buy-sell agreements and key person insurance. Buy-Sell Agreements A buy-sell agreement is a legally binding contract that outlines the procedure for transferring ownership if an owner departs due to death, disability, or retirement. Funding this agreement with life insurance ensures a smooth transition and financial security for the remaining owners and the departing owner's beneficiaries. Types of Buy-Sell Agreements Cross-Purchase Agreement: Each owner purchases a life insurance policy on the other owners. Upon an owner's death, the surviving owners use the policy proceeds to buy the deceased owner's share. This method is often suitable for businesses with a few owners. Entity Purchase Agreement: The business itself owns life insurance policies on each owner. If an owner passes away, the business uses the proceeds to buy back the deceased owner's share, redistributing it among the remaining owners. This approach is typically preferred for businesses with multiple owners. Key Person Insurance Key person insurance is a policy that a business takes out on essential employees whose loss could significantly impact operations. The business owns the policy, pays the premiums, and is the beneficiary. If a key person dies or becomes disabled, the policy proceeds can be used to: Cover the costs of finding and training a replacement. Offset lost revenue resulting from the key person's absence. Reassure clients, creditors, and investors of the business's stability. This strategy is vital for businesses where certain individuals are integral to success, such as top executives, lead developers, or primary sales personnel. Additional Strategies Beyond buy-sell agreements and key person insurance, consider these life insurance strategies: Collateral Assignment: Use a life insurance policy as collateral for business loans. In the event of the owner's death, the lender is paid from the policy proceeds, preventing financial strain on the business. Executive Bonus Plans: Provide key employees with life insurance policies as part of their compensation package. This not only offers them personal financial protection but also serves as an incentive for retention. Deferred Compensation Plans: Promise to pay key employees a certain amount at retirement, funded through life insurance policies. This ensures the business can meet its obligations without affecting cash flow. Implementing life insurance strategies is essential for business owners aiming to protect their enterprises from unforeseen events. Work with us to explore your life insurance options and we can help your business remain resilient and continue to thrive.

What Happens If You Outlive Your Term Life Insurance?

February 1, 2025
Term life insurance provides coverage for a specified period, such as 10, 20, or 30 years. If you outlive your term policy, the coverage ends, and no death benefit is paid to your beneficiaries. As you approach the end of your term, it's essential to evaluate your current financial situation and consider options to maintain life insurance coverage if needed. Options to Consider Annual Renewable Term: Some term policies offer an option to renew annually after the initial term expires. While this allows you to extend coverage without a medical exam, premiums typically increase each year based on your age, making it a potentially costly option over time. PROGRESSIVE.COM Policy Conversion: Term-to-Permanent Conversion: Many term policies include a conversion feature, allowing you to convert your term policy into a permanent life insurance policy, such as whole or universal life, without undergoing a medical examination. This option can provide lifelong coverage and build cash value, but premiums will be higher than those of the original term policy. NEWYORKLIFE.COM Purchasing a New Policy New Term Policy: Applying for a new term life insurance policy can be an option, especially if you're still in good health. However, premiums will be higher due to increased age, and you may need to undergo a medical exam. Permanent Life Insurance: Alternatively, you might consider purchasing a permanent life insurance policy, which provides lifelong coverage and accumulates cash value. This option is generally more expensive but offers additional benefits. Exploring Alternative Coverage: Final Expense Insurance: Designed to cover end-of-life expenses, such as funeral costs and medical bills, final expense insurance offers a smaller death benefit with more affordable premiums and may not require a medical exam. Guaranteed Universal Life Insurance: This type of policy provides coverage for a specified age (e.g., up to age 90 or 100) with lower premiums compared to whole life insurance, focusing primarily on the death benefit without significant cash value accumulation. Take Action Now As your term life insurance policy nears its expiration, assess your current financial needs and health status to determine the most suitable course of action. Consulting with an insurance professional can help you navigate your options and select the best solution to ensure continued financial protection for your loved ones.
More Posts
Share by: