What to do with your 401(k) at retirement
Retiring does not force one choice. Your four options stay the same, and the withdrawal rules change at set ages.
| Option | Upside | Downside |
|---|---|---|
| Leave it in the old plan | ✓ Nothing to move now | ✗ You cannot add new money. Old plan fees may still apply. |
| Move it to a new employer plan | ✓ One account to manage | ✗ Only if the new plan accepts transfers. Fees differ. |
| Roll it to an IRA | ✓ Often a wider range of investments | ✗ IRA fees vary by provider. Plan loans do not carry over. |
| Cash it out | ✓ Money is available now | ✗ Taxed as income. 20% withheld. A 10% extra tax applies before 59½ unless an exception applies. |
Source: https://www.finra.org/investors/learn-to-invest/types-investments/retirement/401k-investing/401k-rollovers and https://www.finra.org/rules-guidance/notices/13-45 and https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions and https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions
Know when required withdrawals start
Required minimum distributions generally start at age 73. Under SECURE 2.0, the starting age rises to 75 for people born in later years.
Source: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
Review the plan's payout choices
Plans set their own payout options, such as lump sums or regular payments. Ask the administrator which ones it offers.
Compare fees before you pick
Fees can differ between the plan and an IRA. Compare annual costs in writing before you move any money.
Know how withdrawals are taxed
Pre-tax 401(k) withdrawals count as income in the year you take them. Taxes can be withheld at the time of payment.
Match withdrawals to your budget
Compare how much each payout method pays and how long it lasts. Test a few amounts before you commit.
Common questions
Should I keep my 401(k) after I retire?
All four options remain available. Compare fees, withdrawal rules and taxes for each, then decide what matters most to you.
How do I choose a payout method?
Start with the payout methods the plan offers. Ask how each one affects taxes and how long the money lasts.
What if I have old plan balances too?
The same four options apply to each old balance. Compare fees and payout rules for each before you combine accounts.
Want the dollar effect first? Run your numbers in the free calculator to see how fees add up in dollars.
About a minute.