I’m Thinking About Retirement, What Should I Do?

If you are thinking about retirement, you are likely contemplating how to best manage and utilize your hard-earned retirement savings. After years of diligent saving, the shift from accumulation to distribution phase is a critical transition. Here are some key considerations and options for managing your retirement savings effectively.

Understanding Your Distribution Options

When you retire, you typically have several options for managing your retirement savings held in an employer’s plan:

  1. Distribution in Cash: Opting for a lump-sum cash withdrawal from your employer’s plan might seem straightforward, but it comes with heavy financial consequences, including a mandatory 20% federal tax withholding and potential additional federal taxes, especially if you are in a higher tax bracket. Moreover, if you are under 59 1/2, a 10% early withdrawal penalty generally applies. This option can significantly diminish your retirement savings due to taxes and penalties.
  2. Remain in Your Employer’s 401(k) Plan: Keeping your savings invested in your employer’s plan can be a viable option. It avoids immediate taxes and penalties and may provide benefits such as loan options or stable investment choices not available elsewhere. However, this choice might limit your control over investment decisions and access to funds.
  3. Rollover IRA: Rolling over your retirement savings into an Individual Retirement Account (IRA) offers a protective and flexible environment for your funds. A Rollover IRA maintains the tax-deferred status of your savings and typically provides a broader array of investment options than employer-sponsored plans. This option also facilitates easier access to your funds and the consolidation of various retirement accounts you might have accumulated over the years.
  4. Income Annuity: If you’re concerned about outliving your resources, converting a portion of your retirement savings into an income annuity can be a prudent choice. An annuity provides a consistent stream of income for life or a specified period. While it offers financial security, it does lock in your capital, meaning you cannot access these funds once the annuity is purchased.

Benefits of Consulting with an Independent Fee-Only Adviser

Navigating these options can be complex, involving critical decisions about tax implications, investment strategies, and income planning. Working with an independent fee-only adviser or accountant specializing in financial planning offers several advantages:

  • Tailored Advice: Independent advisers provide personalized advice that aligns with your specific financial situation, retirement goals, and risk tolerance.
  • Comprehensive Planning: They consider all aspects of your financial life, including estate planning, tax implications, and retirement income strategies.
  • Fiduciary Standard: Fee-only advisers operate under a fiduciary standard, meaning they are obligated to act in your best interests without any conflict of interest from commission-based products.


As you contemplate retirement, carefully consider how you will manage your retirement savings to support your lifestyle without compromising your financial security. Whether you choose to cash out, stay in your employer’s plan, roll over to an IRA, or purchase an annuity, each option should be evaluated with a comprehensive understanding of its implications. Consulting with a fee-only financial adviser can provide clarity and confidence in your decisions, helping ensure that your retirement savings work effectively for you in your golden years.

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