This is one of the most common questions I hear from AMAC members. If you’re asking yourself the same thing, you’re not alone—and asking now already puts you ahead of most people. I think there’s a better question:
What do you need this money to do for you now?
During your working years, your 401(k)’s job was accumulation. In retirement, that job changes. Your savings may need to create income, keep growing, protect against market losses, address long-term-care concerns, or preserve assets for your family—often some combination of all five. That’s why there’s no cookie-cutter answer.
Start with what’s actually inside the account. Pre-tax 401(k) money can generally roll into a traditional IRA tax-deferred; Roth 401(k) money into a Roth IRA. Move pre-tax money into a Roth, though, and you create a taxable event. And a direct rollover to the new custodian can avoid the mandatory 20 percent withholding that applies when a distribution is paid to you first.
There’s more. Retirees who leave an employer during or after the year they turn 55 may qualify for an exception to the 10 percent early-distribution penalty on withdrawals from that plan—one a rollover could quietly eliminate. If your 401(k) holds highly appreciated company stock, rules around net unrealized appreciation are also worth reviewing first. Get it wrong, and you could overpay in taxes.
These are just a few reasons I tell retirees: Build the plan first, move the money second.
An IRA may offer more flexibility—part generating income, part staying invested for growth, part protected with a guaranteed return, part addressing long-term care, part diversified into alternatives.
The right answer often involves several strategies, each with a specific job. That is retirement planning.
Before you decide anything, sit with these: How much income will I need? How much risk am I comfortable taking? How much should be guaranteed? How will I address long-term care, taxes, and legacy?
If you don’t have confident answers yet, that’s normal.
At RoseMark Advisors, powered by AMAC, we start with one question: What does a confident retirement mean for you? From there, we help you work through income, taxes, risk, long-term care, and legacy—and build a plan around your answers, not ours.
You spent decades building your 401(k). Before you roll it over, it’s worth one honest conversation about what it needs to do for you now.
Frank Kestler
Financial Advisor, Rosemark Advisors
401(k) vs. Traditional IRA: What’s the Difference?
401(k): A retirement plan offered through an employer. Contributions are generally deducted from your paycheck, and some employers provide matching contributions. A 401(k) typically has higher contribution limits but fewer investment choices.
Traditional IRA: A retirement account you establish independently. It generally offers more investment choices, although contributions may not be tax-deductible depending on your income and workplace retirement coverage.
What They Share: Both can provide tax-deferred growth, and withdrawals are generally taxable in retirement. Both may also be subject to required minimum distributions.
Can You Have Both? Yes—but contributing to a workplace plan may affect whether your traditional IRA contribution is deductible.
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