By Andy Holmes, AWMA® – Vice President & Wealth Management Advisor
When you are close to retirement, you might be wondering about what you should do with your 401(k). The success of your retirement depends on what you do with the money in your qualified retirement plan.
In many cases, visiting with us is a great first step. We can evaluate your individual situation and advise you on the best path to take. Remember, since we are a fiduciary, we are legally and ethically bound to always put your best interests first. In most situations like this, an IRA Rollover might be the best avenue to take. You can continue the tax deferral that your 401(k) account has always enjoyed. However, be sure that you use a “trustee-to-trustee” transfer of the funds to avoid the 20% tax withholding that otherwise would apply to your distribution.
Will your distribution include shares of stock with your employer? If so, you should consider not rolling those shares over, but accepting them for your taxable portfolio. Income taxes on “net unrealized appreciation” in those securities may be deferred in this manner. Your accountant can give you more details.
You will also need an investment plan for your retirement money. When you begin this process, consider your taxable and tax-deferred funds as part of one large portfolio. The plan that you or your investment advisor creates should take all of your resources into consideration, as well as your retirement income needs. The earlier you start planning for retirement, the better. And of course, we can help you with all of these questions at Central Trust Company.